The ad curve:
a.explains long run fluctuations in output and inflation.
b.shows how changes in equilibrium output affect the inflation rate.
c.demonstrates how central banks respond to changes in interest rates by changing the inflation rate.
d.all of the above.
e.none of the above. 7.the ad curve:
a.explains how inflation affects output in the short run.
b.indicates the level of aggregate output corresponding to different goods-market-clearing levels of the interest rate.
c.is downward sloping, because with higher inflation comes higher interest rates and lower spending, so equilibrium aggregate output declines.
d.all of the above.
e.none of the above.