Suppose the Economy Is Initially Operating at Its Long Run

Multiple Choice

Suppose the economy is initially operating at its long run equilibrium. In the absence of stabilization policy,a sudden sharp reduction in exports due to recession overseas would cause

A) an inward shift of aggregate supply, followed by a slow outward shift of aggregate demand
B) an inward shift of aggregate demand, followed by an inward shift of aggregate supply
C) an outward shift of aggregate demand, followed by a slow inward shift of aggregate supply
D) a recession accompanied by inflation
E) a relatively short recession followed by a long, slow recovery