When both long-run and short-run aggregate supply shift leftward,
A) monetary policy is more likely to restore the economy to its prerecession conditions.
B) inflation is not a concern.
C) the natural rate of unemployment decreases.
D) monetary policy can have no effect on the economy,even in the short run.
E) monetary policy is much less likely to restore the economy to its prerecession conditions.

Question

Quizplus · Accepted Answer

When both long-run and short-run aggregate supply shift leftward, it indicates that the economy's potential output and actual output have decreased. In this scenario, monetary policy may not be able to restore the economy to its prerecession conditions as easily, making option E the correct choice.

When Both Long-Run and Short-Run Aggregate Supply Shift Leftward