Consider the following statement: "President Nixon expressed satisfaction with last year's economic performance. He said that with inflation and unemployment heading down, the nation 'is on the right course'. " Which of the following could have caused this phenomenon?
A) Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left.
B) Expansionary fiscal and monetary policies that shifted the aggregate demand curve to the right.
C) Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right.
D) Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right.

Question

Quizplus · Accepted Answer

The statement mentions both inflation and unemployment heading down, which suggests a decrease in both price level and output. Expansionary fiscal and monetary policies, such as increasing government spending and lowering interest rates, can lead to an increase in aggregate demand and output in the short run, while also increasing the price level. Therefore, the most likely cause of the mentioned phenomenon is the expansionary fiscal and monetary policies that shifted the aggregate demand curve to the right.

Consider the Following Statement: "President Nixon Expressed Satisfaction with Last