Suppose the economy is at full employment and the AS curve shifts upward due to a once-and-for-all increase in the price of oil.If the central bank does not respond to this shock,
A) prices will rise and stay at the higher level with no further inflation.
B) a recessionary gap will be created,which will eventually cause the AS curve to shift back downward.
C) aggregate demand will shift up and cause further inflation.
D) an inflationary gap will be created,which will cause the AS curve to shift upward again.
E) a recessionary gap will be created and will cause a permanent reduction in employment.
Correct Answer:
Verified
Q62: Suppose there is a positive AD shock,and
Q63: Suppose the AS curve is continuously shifting
Q64: "Demand inflation" refers to
A)the inflation that results
Q65: Isolated negative aggregate supply shocks,in the absence
Q66: Economists use the term "monetary validation" to
Q68: The reason that some economists advise central
Q69: Suppose the economy is in a long-run
Q70: There can be strong pressure on the
Q71: The act of "monetary validation" by a
Q72: If the economy is faced with continued
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents