The Australian economy is initially in long-run equilibrium. Due to prolonged peace, the Federal Governments decides to cut its defence spending
by $1 billion. In the short run
A the aggregate demand curve shifts left and the short-run aggregate supply curve shifts left.
Bthe aggregate demand curve shifts left and the short-run aggregate supply curve does not shift.
Cthe aggregate demand curve shifts right and the short-run aggregate supply curve shifts left.
Dthe aggregate demand curve shifts left and the short-run aggregate supply curve shifts right.
Ethe aggregate demand curve shifts right and the short run aggregate supply curve does not shift.