Refer to the Figure Above

Multiple Choice

Refer to the figure above. Suppose the economy is operating in a recession such as point B. If policymakers allow the economy to adjust to the long-run natural rate on its own, people will

A) reduce their price expectations and the short-run aggregate supply will shift right.
B) raise their price expectations and aggregate demand will shift left.
C) raise their price expectations and the short-run aggregate supply will shift left.
D) reduce their price expectations and aggregate demand will shift right.