A central bank might decide to "validate" a negative supply shock because
A) there is no other way to return the economy to full employment.
B) the economy might suffer a long slump before wages and prices fall enough to restore full employment.
C) there is no process by which the economy will return to potential output.
D) it is an effective means of preventing inflation.
E) there are no negative effects from this policy action.
Correct Answer:
Verified
Q73: An inflation that begins as a result
Q74: Q75: If the central bank responds to a Q76: Suppose the Canadian economy is booming due Q77: "Supply inflation" refers to Q79: Suppose an increase in world oil prices Q80: With regard to inflation,the "acceleration hypothesis" states Q81: The Bank of Canada has formally adopted Q82: The three figures below show the phases Q83: The view that sustained inflation is possible![]()
A)inflation arising from a
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