Multiple Choice
Which of the following best depicts the short-run effect of a price shock due to a large increase in oil prices?
A) The IA line shifts up, causing interest rates to rise, which causes the AD curve to shift to the right.
B) The IA line shifts up, causing interest rates to rise, which causes a leftward movement along the AD curve.
C) The AD curve shifts to the left, causing interest rates to rise, which causes the IA line to shift down.
D) The IA line shifts down, causing interest rates to rise, which causes a leftward movement along the AD curve.
E) The IA line shifts up, causing interest rates to rise, which causes the AD curve to shift to the left.
Correct Answer:
Verified
Correct Answer:
Verified
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