Suppose the aggregate demand curve in an economy is Y=20 000-20 000p, current inflation (p) equals 0.06
(6%), and potential output (Y*) equals 18 800. If, starting from long-run equilibrium, an aggregate supply shock reduces potential output to 18 400, in the short run there will be a(n) _______ gap and, in the long run, inflation will equal _____ %.
a. expansionary; 8
b. expansionary; 6
c. expansionary; 7
d. recessionary; 6
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