(Figure: Shifts in SRAS and AD) If the Economy Is

Multiple Choice

(Figure: Shifts in SRAS and AD) If the economy is at short-run equilibrium point b because of a negative supply shock, the Federal Reserve may focus on price stability and enact a restrictive monetary policy, thus shifting the new equilibrium to point _____. As a result of this, the price level would _____ and real output would _____.

A) a; decrease to its previous level; further decrease
B) c; further increase; increase
C) d; decrease; increase
D) remain at point b; not have any effect