Assume that the economy is in equilibrium when aggregate demand curves shifts to the right. What happens to the economy in the short-run? the GDP gap becomes positive. Allowed to self-correct, the economy will experience higher inflation. the GDP gap becomes negative. Allowed to self-correct, the economy will experience higher inflation. the GDP gap does not change, but the inflation rate will rise. there is not enough information to answer the question.
Assume that the economy is in equilibrium when aggregate demand curves shifts to the right. What happens to the economy in the short-run? the GDP gap becomes positive. Allowed to self-correct, the economy will experience higher inflation. the GDP gap becomes negative. Allowed to self-correct, the economy will experience higher inflation. the GDP gap does not change, but the inflation rate will rise. there is not enough information to answer the question.
Chapter20: Monetary Policy
Section20.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model
Problem 6SQ
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Assume that the economy is in equilibrium when aggregate demand curves shifts to the right. What happens to the economy in the short-run?
the GDP gap becomes positive. Allowed to self-correct, the economy will experience higher inflation.
the GDP gap becomes negative. Allowed to self-correct, the economy will experience higher inflation.
the GDP gap does not change, but the inflation rate will rise.
there is not enough information to answer the question.
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