In the long run, a price shock results in
A)an inflation rate greater than the baseline.
B)an inflation rate the same as the baseline.
C)an inflation rate lower than the baseline.
D)a permanent decline in potential GDP.
E)real GDP being less than potential GDP.

Question

Quizplus · Accepted Answer

In the long run, a price shock typically results in an inflation rate that returns to the baseline, as economies adjust to the shock through mechanisms like wage and price adjustments, and monetary policy responses.

In the Long Run, a Price Shock Results in