Consider an economy initially at a medium-run equilibrium, where output is stable and there is no upward or downward pressure on the price level. A sudden, positive, and lasting shock to aggregate demand occurs, such as a large increase in autonomous investment. What is the most likely sequence of events as the economy adjusts and moves into a boom?

Analyzing a Demand-Driven Recession

Analyzing a Consumer Confidence Shock

An economy is observed to have the following characteristics: output is below the level consistent with a stable price level, the unemployment rate is higher than the rate at which the labor market is in equilibrium, and there is downward pressure on prices and wages. Based on a model where business cycles are driven by fluctuations in aggregate demand, which phase of the cycle does this scenario best represent?