If the economy begins at an equilibrium at potential output, a negative aggregate demand shock has which of the following effects in the short-ru? a. output and prices increase and unemployment falls below the natural rate b. output and prices increase and unemployment rises above the natural rate c. output and prices decrease and unemployment rises above the natural rate d. output and prices decrease and unemployment falls below the natural rate
If the economy begins at an equilibrium at potential output, a negative aggregate demand shock has which of the following effects in the short-ru? a. output and prices increase and unemployment falls below the natural rate b. output and prices increase and unemployment rises above the natural rate c. output and prices decrease and unemployment rises above the natural rate d. output and prices decrease and unemployment falls below the natural rate
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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If the economy begins at an equilibrium at potential output, a negative aggregate demand shock has which of the following effects in the short-ru?
a. output and prices increase and unemployment falls below the natural rate
b. output and prices increase and unemployment rises above the natural rate
c. output and prices decrease and unemployment rises above the natural rate
d. output and prices decrease and unemployment falls below the natural rate
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