Suppose the Economy Is Initially in a Long-Run Macroeconomic Equilibrium

Multiple Choice

Suppose the economy is initially in a long-run macroeconomic equilibrium.A shock then hits the economy and we observe that the unemployment rate decreases and the price level increases.We can conclude that ________ has increased and there is now a(n) ________ gap.

A) aggregate supply; inflationary
B) aggregate demand; recessionary
C) aggregate supply; recessionary
D) aggregate demand; inflationary