If a New Government Adopted Some Ill-Advised Regulations Causing the Economy

Multiple Choice

If a new government adopted some ill-advised regulations causing the economy to be less efficient ________.

A) the ensuing negative supply shock would lead to an immediate rise in inflation
B) in the short-run this would create a negative output gap but eventually the previous general equilibrium would be restored by subsequent rightward shifts of the AS curve
C) there would be no permanent changes in output and inflation
D) all of the above
E) none of the above