-Refer to Figure 16-2

Multiple Choice

-Refer to Figure 16-2.Suppose a supply shock shifts the aggregate supply curve from AS₁ to AS₂,and decreases output below full employment.If the Fed then decreases the money supply,it will

A) stabilize the price level,but cause a further decline in output
B) return output to its full-employment level,but at the expense of an increase in the price level
C) increase both output and the price level
D) stabilize the price level and return output to its full-employment level
E) decrease the price level and shift the aggregate demand curve to the right until output returns to its full-employment level