Use the following to answer questions .
Exhibit: Effects of Monetary Policy
-(Exhibit: Effects of Monetary Policy) If a nonintervention policy were adopted in Panel (a),
A) the aggregate demand curve would have eventually shifted as shown.
B) the short-run aggregate supply curve would have eventually shifted to the left and restored full employment.
C) the short-run aggregate supply curve would have eventually shifted to the right and restored full employment.
D) both the aggregate demand curve and the short-run aggregate supply curve would have eventually shifted to the left.

Question

Use the following to answer questions .
Exhibit: Effects of Monetary Policy 
-(Exhibit: Effects of Monetary Policy) If a nonintervention policy were adopted in Panel (a),
A) the aggregate demand curve would have eventually shifted as shown. 
B) the short-run aggregate supply curve would have eventually shifted to the left and restored full employment. 
C) the short-run aggregate supply curve would have eventually shifted to the right and restored full employment. 
D) both the aggregate demand curve and the short-run aggregate supply curve would have eventually shifted to the left.

Quizplus · Accepted Answer

In a nonintervention policy, the economy self-corrects. The short-run aggregate supply curve shifts to the right as wages and prices adjust downward, restoring full employment.

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