Consider the following statement: "President Carter expressed concern about reports of rising inflation but insisted the economy is on the right course. He pointed to recent reductions in unemployment as evidence that his economic policies are working." Which of the following could have caused this phenomenon?
A) Increase in government spending that shifted the aggregate demand curve to the right.
B) Increase in money supply which lowered interest rates and shifted the short-run aggregate supply curve to the right.
C) Economic agents revising their expectations about the price level resulting in the short-run aggregate supply curve shifting to the left.
D) Expansionary fiscal and monetary policies that shifted the long-run aggregate supply curve to the right.

Question

Quizplus · Accepted Answer

An increase in government spending can boost aggregate demand, leading to higher output and employment, which aligns with the reduction in unemployment mentioned. However, it can also contribute to inflationary pressures, explaining the concern about rising inflation.

Consider the Following Statement: "President Carter Expressed Concern About Reports