Answer Happy

Consider an economy that is initially in its​ long-run
equilibrium. Suppose this economy experiences a positive aggregate
demand shock. What can a central bank achieve through
changing​ short-term interest​ rates?
A.
All of these statements are correct
B.
The central bank can bring back both output and inflation back
to their original​ level, through a reduction in aggregate
demand
C.
The central bank can bring inflation back to its
original​ level, but only at the cost of lower output in the
short run
D.
The central bank can bring back both output and inflation back
to their original​ level, through an increase in aggregate
supply