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Based on the Figure Below

Question 122

Multiple Choice

Based on the figure below. Starting from long-run equilibrium at point C, a favorable inflation shock that decreases inflation from π to π1 will lead to a short-run equilibrium at point ___ creating _____gap. Based on the figure below. Starting from long-run equilibrium at point C, a favorable inflation shock that decreases inflation from π<sub> </sub>to π<sup>1</sup> will lead to a short-run equilibrium at point ___ creating _____gap. A) A; an expansionary B) A; a recessionary C) B; recessionary D) B; expansionary


A) A; an expansionary
B) A; a recessionary
C) B; recessionary
D) B; expansionary

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