Suppose the Economy Is in a Long- Run Equilibrium

Suppose the economy is in a long- run equilibrium. The AS curve now shifts upward due to a one- time increase in the price of raw materials. If the central bank validates this supply shock,

A) an inflationary gap will be created, which will cause the AS curve to shift upward again.
B) a recessionary gap will be created and will cause a permanent reduction of employment.
C) the aggregate demand curve will shift up and result in a higher price level.
D) an inflationary gap will be created with further inflation
E) a recessionary gap will be created, which eventually causes the AS curve to shift downward.