In the short-run model, a negative aggregate demand shock to households' consumption (a decrease in āc) corresponds to an shift of the IS curve. The Central Bank can bring the economy back to its potential by the interest rate.

In the short-run model, a negative aggregate demand shock to households' consumption (a decrease in āc) corresponds to an shift of the IS curve. The Central Bank can bring the economy back to its potential by the interest rate.

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter34: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 4CQQ

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Question

In the short-run model, a negative aggregate demand
shock to households' consumption (a decrease in āc)
corresponds to an
shift of the IS curve.
The Central Bank can bring the economy back to its
potential by
the interest rate.
inwards; increasing
outwards; increasing
outwards, decreasing
inwards; decreasing

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