Suppose that the economy is hit by a negative demand shock (a shock that causes AD to shift left), and the central bank chooses to do nothing in response. What will happen in the long-run? O Output will be lower. O Inflation will be lower. O Output will be higher. O Inflation will be higher. O Inflation will not change.
Suppose that the economy is hit by a negative demand shock (a shock that causes AD to shift left), and the central bank chooses to do nothing in response. What will happen in the long-run? O Output will be lower. O Inflation will be lower. O Output will be higher. O Inflation will be higher. O Inflation will not change.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose that the economy is hit by a negative demand shock (a shock that causes
AD to shift left), and the central bank chooses to do nothing in response. What will
happen in the long-run?
O Output will be lower.
O Inflation will be lower.
O Output will be higher.
O Inflation will be higher.
O Inflation will not change.
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