Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision,they can offset the initial shift by shifting
A)aggregate supply right.
B)aggregate supply left.
C)aggregate demand right.
D)aggregate demand left.

Question

Quizplus · Accepted Answer

If policymakers can respond with sufficient speed and precision, they can offset the initial shift caused by a decrease in aggregate demand by shifting aggregate demand right. This can be done through policies such as fiscal stimulus, monetary policy or exchange rate interventions. Shifting aggregate supply would not be effective in this scenario as it would not directly address the decrease in demand.

Suppose a Shift in Aggregate Demand Creates an Economic Contraction