Starting from long-run equilibrium, an adverse inflation shock results in a short-run equilibrium with ________ inflation and ________ output.
A)higher; higher
B)higher; lower
C)higher; potential
D)lower; lower

Question

Quizplus · Accepted Answer

An adverse inflation shock is modeled as an upward shift in the SRAS curve. In the short run, this results in higher inflation and lower output.

Starting from Long-Run Equilibrium, an Adverse Inflation Shock Results in a Short-Run