Graphically inflation shocks shift the ________ and shocks to potential shift the ________.
A. aggregate demand curve; short-run aggregate supply line
B. short-run aggregate supply line; long-run aggregate supply line
C. long-run aggregate supply line; short-run aggregate supply line
D. aggregate demand curve; long-run aggregate supply line
Answer: B
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Which of the following statements is true of a flexible exchange rate system?
A) Market forces tend to undervalue a currency over time. B) Market forces tend to overvalue a currency over time. C) Market forces do not affect exchange rates between different currencies. D) Market forces tend to push the exchange rate of a currency to market clearing levels over time.
Which of the following goods and services are omitted from GDP?
A) household production B) expenditure on resources used to protect the environment C) services such as hair styling D) government weather satellites E) capital goods
The interest rate thought to have the most important impact on aggregate demand is the
A) short-term interest rate. B) T-bill rate. C) rate on 90-day CDs. D) long-term interest rate.
One way of expressing the concept of the short-run Phillips curve is to say that: a. the cost of reducing unemployment is higher inflation
b. nothing but good comes from reducing unemployment. c. the cost of reducing inflation is lower unemployment. d. aggregate supply and aggregate demand will always be equal at the potential output level. e. the best economic policy is one that attempts to make the rate of inflation equal to the rate of unemployment.