Suppose that there is a positive aggregate demand shock and the central bank commits to an inflation rate target. But if the commitment is not credible, then
A) the public's expected inflation will remain unchanged.
B) the short-run aggregate supply curve will rise.
C) over time inflation will fall back down to the inflation target.
D) all of the above.
E) both A and B.
B
You might also like to view...
Because Product X has a large positive income elasticity, it is likely that the product
A) has many good substitutes. B) has few good complements. C) is a necessity. D) is a luxury.
As interest rates rise, the expected absolute return of money ________, money's expected return relative to bonds ________
A) does not change; decrease B) rises; decrease C) does not change; increase D) falls; decrease
Which of the following will limit the money creation process to an amount less than the potential amount?
What will be an ideal response?
Which of the following summarizes the transactions involving the international exchange of goods and services, investment income, and other miscellaneous transactions?
A. Balance of trade B. Statistical discrepancy C. Current account D. Capital account