Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the first period after the policy change, the DAS curve _____, and the DAD curve _____.
A)shifts upward; shifts rightward
B)does not shift; shifts leftward
C)does not shift; does not shift
D)shifts downward; shifts leftward

Question

Quizplus · Accepted Answer

The Answer of Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the first period after the policy change, the DAS curve _____, and the DAD curve _____.
A)shifts upward; shifts rightward
B)does not shift; shifts leftward
C)does not shift; does not shift
D)shifts downward; shifts leftward

Beginning at Long-Run Equilibrium in the Dynamic Model of Aggregate