Suppose that the money prices of raw materials increase so that short-run aggregate supply decreases.If the Federal Reserve does not respond,the higher money price of raw materials will
I.repeatedly shift the aggregate demand curve rightward and raise the price level.
Ii.shift the aggregate demand curve rightward and the aggregate supply curve leftward,raising prices.
Iii.result initially in lower employment and a higher price level.
A)i only
B)both i and ii
C)both ii and iii
D)i and iii
E)iii only

Question

Quizplus · Accepted Answer

Initially, the decrease in short-run aggregate supply due to higher raw material prices will lead to a higher price level and lower employment, as the economy adjusts to the new cost structure.

Suppose That the Money Prices of Raw Materials Increase So