Figure 1 Refer to the figure above. Suppose the economy is operating in a recession such as point B. If policymakers wished to move output to its long-run natural rate, they should attempt to shift
A) aggregate demand to the left.
B) short-run aggregate supply to the left.
C) aggregate demand to the right.
D) short-run aggregate supply to the right.

Question

Figure 1  ​ Refer to the figure above. Suppose the economy is operating in a recession such as point B. If policymakers wished to move output to its long-run natural rate, they should attempt to shift
A) aggregate demand to the left. 
B) short-run aggregate supply to the left. 
C) aggregate demand to the right. 
D) short-run aggregate supply to the right.

Quizplus · Accepted Answer

Shifting aggregate demand to the right will increase output and move the economy closer to its long-run natural rate. Shifts in short-run aggregate supply will only impact the price level in the short-run and will not affect the level of output in the long-run. Shifting aggregate demand to the left would further reduce output and worsen the recession.

Figure 1 ​ Refer to the Figure Above

Figure 1 Refer to the Figure Above