Refers to Exhibit 4. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policy makers allow the economy to adjust to the long run natural rate on its own, ?

A. People will raise their price expectations and the short run aggregate supply will shift left

B. People will reduce their price expectations and aggregate demand will shift right

C. People will reduce their price expectations and the short run aggregate supply will shift right

D. People will raise their price expectations and aggregate demand will shift left

Found an error? Read our corrections policy and submit a sourced correction below. You can also share a useful explanation in your own words.

Discuss the answer or suggest a sourced correction
Thank you for contributing.
Your comment was submitted and will appear after editorial review.

Your email is used only for moderation and is never displayed. Spam, copied material and fabricated endorsements are rejected.