The divine coincidence A. results in an upward-sloping Phillips curve. B. refers to events that cause both deflation and increases in output. C. happens when an increase in the inflation rate produces no change in the quantity supplied of output. D. refers to policies that accomplish both goals of stabilization policy. Part 2 In what situations will the divine coincidence prevail? A. An aggregate demand shock. B. A permanent supply shock. C. A temporary supply shock. D. Any of the above. E. A and B only. Part 3 What happens when policy makers respond to a temporary supply shock? A. Shifting the aggregate demand curve will return the economy to long-run equilibrium at potential output. B. Shifting the aggregate demand curve to regain price stability will move the economy farther away from potential output. C. Shifting the aggregate supply curve to regain price stability will move the economy farther away from potential output. D. Shifting the aggregate demand curve to restore the economy to potential output will result in no change in the price level