7. If the economy 1s operating on the long-run aggregate supply curve, then expansionary fiscal policy willA) generate higher prices in the short run, but will induce aggregate supply to increase in the long run.B) generate an increase in real GDP and higher prices in both the short run and the long run.C) generate an increase in real GDP without higher prices in the short run, but then real GDP will return to its long-run level, and the price level will increase.D) generate an increase in real GDP and higher prices in the short run, but then real GDP will decrease to its long-run level, and the price level will increase some more. 8. When the Federal Reserve decreases the money supply, it reduces aggregate demand and moves the economy along the short run Phillips curve with inflation and unemployment A) higher, higher; B) lower, lower; C) lower, higher; D) higher, lower. 9. An adverse supply shock will, A) result in a situation with higher inflation and higher unemployment. B) result in a situation with higher inflation and lower unemployment. C) result in a situation with lower inflation and lower unemployment. D) None of the above. 10. If from one year to the next, inflation falls and unemployment also falls, which of the following event could be responsible for the change? A) The central bank increases the money growth rate. B) The government cuts spending and cut taxes. C) Newly discovered oil reserve causes the world oil price to fall. D) The appointment of a new Fed chair increases the expected inflation