Suppose that the aggregate demand (ADI)curve in an economy is Y = 10,000 - 10,000
,current inflation ( )equals 0.03 (3%),and potential output (Y*)equals 9,700.If,starting from long-run equilibrium,an aggregate supply shock reduces potential output to 9,500,in the short run,there will be a(n)___________ gap and,in the long run,inflation will equal _________.
A) expansionary;3%
B) expansionary;5%
C) expansionary;7%
D) recessionary;3%
E) recessionary;5%

Question

Suppose that the aggregate demand (ADI)curve in an economy is Y = 10,000 - 10,000 
,current inflation (  )equals 0.03 (3%),and potential output (Y*)equals 9,700.If,starting from long-run equilibrium,an aggregate supply shock reduces potential output to 9,500,in the short run,there will be a(n)___________ gap and,in the long run,inflation will equal _________.
A) expansionary;3% 
B) expansionary;5% 
C) expansionary;7% 
D) recessionary;3% 
E) recessionary;5%

Quizplus · Accepted Answer

The Answer of Suppose that the aggregate demand (ADI)curve in an economy is Y = 10,000 - 10,000 
,current inflation (  )equals 0.03 (3%),and potential output (Y*)equals 9,700.If,starting from long-run equilibrium,an aggregate supply shock reduces potential output to 9,500,in the short run,there will be a(n)___________ gap and,in the long run,inflation will equal _________.
A) expansionary;3% 
B) expansionary;5% 
C) expansionary;7% 
D) recessionary;3% 
E) recessionary;5%

Suppose That the Aggregate Demand (ADI)curve in an Economy Is