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Which of the Following Is False

Question 19

Multiple Choice

Which of the following is false?


A) Starting from full employment, an unexpected drop in aggregate demand causes a demand-induced recession.
B) If policymakers do nothing in response to an unexpected drop in aggregate demand, the short-run aggregate supply curve eventually shifts to the right as firms and workers adjust their price expectations downward.
C) If policymakers do nothing in response to an unexpected drop in aggregate demand, the economy eventually returns to full employment at a higher price level.
D) In response to a drop in aggregate demand, if policymakers choose to boost demand through fiscal or monetary policy, then the economy returns to full employment at the original price level.

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