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Assuming the Economy Is Starting at the Natural Rate of Output

Question 4

Multiple Choice

Assuming the economy is starting at the natural rate of output and everything else held constant, the effect of ________ in aggregate ________ is a rise in both the inflation rate and output in the short-run, but in the long-run the only effect is a rise in the inflation rate.


A) a decrease; supply
B) a decrease; demand
C) an increase; supply
D) an increase; demand

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