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

Question

Quizplus · Accepted Answer

A favorable inflation shock is modeled as a downward shift in the SRAS curve. In the short run, this results in lower inflation and higher output.

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