Question 28 In 2020, the US economy experienced a negative shock on aggregate supply as well as a negative shock on aggregate demand. The negative shock on aggregate demand was assumed to be bigger than the negative shock on aggregate supply. What is likely to happen to the short-run equilibrium level of inflation and output under these circumstances? Inflation will increase, and output will decrease. Deflation is likely, and output will decrease. The impact on inflation and output are unknown. Inflation will increase and output will increase.

Question 28 In 2020, the US economy experienced a negative shock on aggregate supply as well as a negative shock on aggregate demand. The negative shock on aggregate demand was assumed to be bigger than the negative shock on aggregate supply. What is likely to happen to the short-run equilibrium level of inflation and output under these circumstances? Inflation will increase, and output will decrease. Deflation is likely, and output will decrease. The impact on inflation and output are unknown. Inflation will increase and output will increase.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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