What does the aggregate supply &aggregate demand model predict about the combined impact of ………………?
You’ve considered two different economic shocks resulting from Katrina:
1) An aggregate supply shock: Katrina increased energy prices and temporarily reduced U.S. productive capacity.
2) An aggregate demand shock: Government responded to the hurricane with massive expenditures on aid and rebuilding.
What does the aggregate supply and aggregate demand model predict about the combined impact of these shocks on the U.S. economy?
A. Real GDP may rise or fall, but the price level will definitely fall.
B. Real GDP may rise or fall, but the price level will definitely rise.
C. Real GDP will definitely fall, but the price level will definitely rise.
D. Real GDP will definitely rise, but the price level may rise or fall.
Tagged with: aggregate supply and aggregate demand • demand model • economic shocks • economy • energy prices • expenditures • gdp • hurricane • katrina • productive capacity • real gdp • supply and aggregate demand • supply shock
Filed under: Hurricane Questions
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D. or
E. Real GDP will definately rise, and the price level will rise (depending on other factors).