9. Economic fluctuations occur because of a shift of the aggregate demand curve (a demand shock) or...
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9. Economic fluctuations occur because of a shift of the aggregate demand curve (a demand shock) or the short -run aggregate supply curve (a supply shock). A demand shock causes the aggregate price level and aggregate output to move in the same direction as the economy moves along the short -run aggregate supply curve. A supply shock causes them to move in opposite directions as the economy moves along the aggregate demand curve. A particularly nasty occurrence is stagflation—inflation and falling aggregate output—which is caused by a negative supply shock.
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Essentials Of Economics
ISBN: 9781429218290
2nd Edition
Authors: Paul Krugman, Robin Wells, Kathryn Graddy
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