Suppose ,
,
,
, and
) For any given
Equals ________ and the economy ________.
A) 0; is in its long-run equilibrium
B) 1.05; has experienced a positive aggregate demand shock
C) 0.45; has experienced a positive aggregate demand shock
D) -0.15; has experienced a negative aggregate demand shock
E) 0.05; has experienced a positive aggregate demand shock

Question

Suppose  , 
, 
, 
, and 
) For any given 
Equals ________ and the economy ________.
A) 0; is in its long-run equilibrium 
B) 1.05; has experienced a positive aggregate demand shock 
C) 0.45; has experienced a positive aggregate demand shock 
D) -0.15; has experienced a negative aggregate demand shock 
E) 0.05; has experienced a positive aggregate demand shock

Quizplus · Accepted Answer

The given information is in the form of an equation for the AD-AS model, where 11eab38d_0718_d5a7_a5fb_cd41253cb493_TB6622_11 represents the price level. A positive aggregate demand shock will increase output and the price level, leading to a coefficient greater than 1 (in absolute value) for 11eab38d_0718_d5a7_a5fb_cd41253cb493_TB6622_11 in the equation. The coefficient is approximately 0.05, indicating a small positive shock to aggregate demand.