Suppose That the Aggregate Demand (ADI)curve in an Economy Is

Multiple Choice

Suppose that the aggregate demand (ADI) curve in an economy is Y = 20,000 - 20,000
,current inflation ( 11ec9ae2_bd79_1ce7_a39a_a9c7bc0c6307_TB34225555_11 ) equals 0.04 (4%) ,and potential output (Y*) equals 19,200.If,starting from long-run equilibrium,an aggregate supply shock reduces potential output to 18,800,in the short run,there will be a(n) ___________ gap and,in the long run,inflation will equal _________.

A) expansionary;4%
B) expansionary;6%
C) expansionary;8%
D) recessionary;4%
E) recessionary;6%