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.

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.单项选择题

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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.单项选择题