Any non-policy-induced increase in aggregate demand affecting an economy initially operating at full potential
A) can be expected to cause an immediate episode of increased inflation regardless of the policy response.
B) can be expected to cause an immediate episode of unemployment above the natural rate regardless of the policy response.
C) might not cause inflation to rise if policy directed at reducing aggregate demand were enacted swiftly.
D) might not cause inflation to rise if policy directed at increasing aggregate demand further were enacted slowly.
E) none of the above.
Correct Answer:
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