Which of the following is true?
A)Inflation and unemployment rates can both increase in the short run in response to negative supply shocks.
B)Inflation and unemployment rates cannot both decrease in the short run in response to reduced aggregate demand.
C)Inflation and unemployment rates can both decrease in the short run in response to positive supply shocks.
D)All of the above are true.

Question

Which of the following is true?
A)​Inflation and unemployment rates can both increase in the short run in response to negative supply shocks.
B)​Inflation and unemployment rates cannot both decrease in the short run in response to reduced aggregate demand.
C)​Inflation and unemployment rates can both decrease in the short run in response to positive supply shocks.
D)​All of the above are true.

Quizplus · Accepted Answer

All the statements are true. A) Negative supply shocks can lead to higher production costs, reducing output and increasing prices, which can cause both inflation and unemployment to rise. B) Reduced aggregate demand typically leads to lower inflation (due to decreased spending) and higher unemployment (due to reduced production needs), not both decreasing. C) Positive supply shocks can increase output and reduce costs, leading to lower prices (deflation) and potentially lower unemployment if the economy can absorb the increased production efficiently.

Which of the Following Is True