Which of the following is most likely to occur if the central bank of a country decides to boost aggregate demand in response to a temporary supply shock?
A) The economy will experience deﬂation.
B) The level of output in the economy will fall further.
C) The aggregate demand curve will shift to the left.
D) The level of inﬂation in the economy will increase further.

Question

Quizplus · Accepted Answer

When a central bank decides to boost aggregate demand, typically by lowering interest rates or through quantitative easing, it increases the amount of money in circulation. This can lead to higher spending and investment, but also has the potential to increase inflation, especially if the supply cannot meet the boosted demand.

Which of the Following Is Most Likely to Occur If