Aggregate Demand and Supply Analysis

Multiple Choice

Aggregate Demand and Supply Analysis
-In the figure above,assume that output is $10.5 trillion,while potential output is $12 trillion.If there is no policy intervention,we should expect ________.

A) rightward shifts of IS & AD,so that both output and inflation rise
B) a decrease in inflation to shift the MP curve,raising the real interest rate
C) declines in both the inflation rate and the real interest rate as output rises
D) a decrease in inflation to shift the AD curve,causing output to rise
E) none of the above