Reset the graph and click on the blue square to apply a negative supply shock the the economy. Then adjust the movable point to view the effects of potential policy responses to the negative supply shock. Use what you observe to answer the questions that follow. a. In response to the effects of a negative supply shock, policymakers decide to decrease aggregate demand. What are the effects of this choice? an increase in aggregate output, and an increase in the aggregate price level an decrease in aggregate output, and an decrease in the aggregate price level an increase in aggregate output, and an decrease in the aggregate price level an decrease in aggregate output, and an increase in the aggregate price level b. What are the overall tradeoffs with regard to this choice? O Policymakers have chosen to fight inflation by increasing AD, but this further reduces aggregate output and makes the recession worse. O Policymakers have chosen to fight inflation by decreasing AD, but this further reduces aggregate output and makes the recession worse. O Policymakers have chosen to fight a recession by increasing AD, but this further increases aggregate output and makes inflation worse. Policymakers have chosen to fight a recession by decreasing AD, but this further reduces aggregate output and makes inflation worse.
Reset the graph and click on the blue square to apply a negative supply shock the the economy. Then adjust the movable point to view the effects of potential policy responses to the negative supply shock. Use what you observe to answer the questions that follow. a. In response to the effects of a negative supply shock, policymakers decide to decrease aggregate demand. What are the effects of this choice? an increase in aggregate output, and an increase in the aggregate price level an decrease in aggregate output, and an decrease in the aggregate price level an increase in aggregate output, and an decrease in the aggregate price level an decrease in aggregate output, and an increase in the aggregate price level b. What are the overall tradeoffs with regard to this choice? O Policymakers have chosen to fight inflation by increasing AD, but this further reduces aggregate output and makes the recession worse. O Policymakers have chosen to fight inflation by decreasing AD, but this further reduces aggregate output and makes the recession worse. O Policymakers have chosen to fight a recession by increasing AD, but this further increases aggregate output and makes inflation worse. Policymakers have chosen to fight a recession by decreasing AD, but this further reduces aggregate output and makes inflation worse.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:ון רבSuip
Reset the graph and click on the blue square to apply a negative supply shock the the economy. Then adjust the movable point to
view the effects of potential policy responses to the negative supply shock.
Use what you observe to answer the questions that follow.
a. In response to the effects of a negative supply shock, policymakers decide to decrease aggregate demand. What are the
effects of this choice?
O an increase in aggregate output, and an increase in the aggregate price level
an decrease in aggregate output, and an decrease in the aggregate price level
an increase in aggregate output, and an decrease in the aggregate price level
an decrease in aggregate output, and an increase in the aggregate price level
b. What are the overall tradeoffs with regard to this choice?
Policymakers have chosen to fight inflation by increasing AD, but this further reduces aggregate output and makes the
recession worse.
Policymakers have chosen to fight inflation by decreasing AD, but this further reduces aggregate output and makes the
recession worse.
O Policymakers have chosen to fight a recession by increasing AD, but this further increases aggregate output and makes
inflation worse.
Policymakers have chosen to fight a recession by decreasing AD, but this further reduces aggregate output and makes
inflation worse.
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