Recent economic fluctuations in the U.S. economy are best explained by
A)shifts of the aggregate demand curve.
B)changes in potential GDP.
C)shifts of the inflation adjustment line.
D)price shocks.
E)changes in aggregate supply.

Question

Quizplus · Accepted Answer

Recent economic fluctuations in the U.S. economy are best explained by shifts of the aggregate demand curve, as factors such as changes in consumer and business confidence, government spending, and monetary policy have affected the level of expenditure in the economy, causing shifts in the AD curve and resulting in fluctuations in real GDP and prices. While changes in potential GDP, price shocks, and changes in aggregate supply can also affect the economy, they are less likely to explain the recent fluctuations as these have been primarily demand-driven. Shifts in the inflation adjustment line are also a possible factor, but they are more closely related to changes in the long-run Phillips curve than to short-term fluctuations.

Recent Economic Fluctuations in the U