Refer to Figure 18-1. The excess burden of the tax is represented by the area

If a hurricane were to wipe out the majority of the eastern seaboard in the United States:

A. neither the short-run nor long-run aggregate supply curves would be affected. B. only the long-run aggregate supply curve would shift left. C. only the short-run aggregate supply curve would shift left. D. the long-run and short-run aggregate supply curves would both shift left.

Based on the diagram, if potential output equals 8,000 and the real interest rate is 4 percent, then there is ________ gap and the Fed must ________ the real interest rate so that output will equal potential output.  

A. a recessionary; lower B. no output; not change C. a recessionary; raise D. an expansionary; raise