The best explanation for the recent economic fluctuations observed in the U.S. economy is
A)one leftward shift of the aggregate demand curve, followed by price adjustment, followed by one rightward shift of the aggregate demand curve, followed by price adjustment.
B)one leftward shift of the aggregate demand curve followed by multiple shifts in the inflation adjustment line.
C)one rightward shift of the aggregate demand curve, followed by price adjustment, followed by one leftward shift of the aggregate demand curve, followed by price adjustment.
D)one rightward shift of the aggregate demand curve followed by multiple shifts in the inflation adjustment line.
E)one leftward shift of the aggregate demand curve followed by one rightward shift.

Question

Quizplus · Accepted Answer

The correct explanation involves a rightward shift of the aggregate demand curve, which typically indicates an increase in consumer spending, investment, or government spending, leading to higher prices (inflation). This is then followed by a leftward shift, indicating a decrease in these factors, leading to a decrease in prices or an economic slowdown. This sequence can explain the fluctuations in the economy through periods of expansion followed by contraction.

The Best Explanation for the Recent Economic Fluctuations Observed in the U.S