The graph below illustrates the effects of monetary policy that shifts the AD curve right. This will result in a __________ in unemployment and a ____________ in the price level.

Question

BlackTom AI · Accepted Answer

When the aggregate-demand curve (AD) shifts to the right, this represents higher overall demand in the economy.
Option 1: 'increase; decrease' would imply higher unemployment and a lower price level. Increases in aggregate demand typically raise both output and the price level in the short run, leading to lower unemployment, not higher, so this pairing is inconsistent with a rightward AD shift.
Option 2: 'increase; increase' suggests that both the price level and unemployment rise. A rightward shift in AD tends to reduce unemployment because more output is produced; at the same time, the higher demand puts upward pressure on the price level. Therefore this option misstates the effect on unemployment by making it increase.
Option 3: 'decrease; decrease' implies that both the price level and unemployment fall. While higher output can lower unemployment, the price level would generally rise with stronger demand, not fall. Thus this combination is not aligned with a rightward AD shift.
Option 4: 'decrease; increase' correctly states that unemployment decreases due to higher real GDP (more employment and output) and the price level increases due to demand-pull inflation from higher aggregate demand. This matches the standard short-run macroeconomic response to an expansionary monetary policy that shifts AD right.

ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser

The graph below illustrates the effects of monetary policy that shifts the AD curve right. This will result in a in unemployment and a __ in the price level.

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ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser

The graph below illustrates the effects of monetary policy that shifts the AD curve right. This will result in a __________ in unemployment and a ____________ in the price level.

View Explanation

Log in for full answers

Similar Questions

Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. What happens in the short run?

If the economy is at point A

At output level Yk,

Figure 33-6 ​ Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P1 and Y1 , then it must be the case that

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Assume this economy is initially producing an output of Y1. As the economy moves from Y1 to Y2 ___.

An increase in the price level ___.

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

The graph below illustrates the effects of monetary policy that shifts the AD curve right. This will result in a in unemployment and a __ in the price level.

Figure 33-6 Refer to Figure 33-6. Suppose the economy starts at A. If changes occur that move the economy to a new short-run equilibrium of P1 and Y1 , then it must be the case that

Figure 33-5 Refer to Figure 33-5. Suppose the economy starts at Point Y. If there is a reduction in aggregate demand, then in the long run the economy moves to