In the short run,a negative AD shock will cause the inflation rate to:
A) increase.
B) decrease.
C) remain unchanged.
D) become more volatile.

Name: In the short run,a negative AD shock will cause the inflation rate to: A) increase. B) decrease. C) remain unchanged. D) become more volatile.
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Question

Quizplus · Accepted Answer

A negative AD shock will cause a decrease in output and increase in unemployment. This, in turn, puts downward pressure on prices and reduces inflation. Therefore, the inflation rate will decrease in the short run.

In the Short Run,a Negative AD Shock Will Cause the Inflation