Suppose that data for a particular economy over time suggest that its aggregate demand curve is both steep and shifts frequently.We might reasonably infer that ________.
A)the central bank has an activist emphasis on the stability of economic activity
B)wages and prices are remarkably flexible
C)policy lags are quite long
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

If the economy's aggregate demand curve is shifting frequently, it suggests that the central bank is actively implementing monetary policy to stabilize economic activity. This also implies that policy lags are likely shorter than if changes in aggregate demand were less frequent. The steepness of the aggregate demand curve suggests that changes in the price level have a significant impact on aggregate demand, which could indicate that wages and prices are relatively flexible. However, this is not a necessary inference, as other factors can influence the steepness of the aggregate demand curve as well.

Suppose That Data for a Particular Economy Over Time Suggest