In the long run,a negative real shock will cause the inflation rate to:
A) increase.
B) decrease.
C) remain unchanged.
D) become more difficult to predict.

Question

Quizplus · Accepted Answer

A negative real shock, such as a decrease in productivity or a natural disaster, typically leads to higher production costs, which can cause firms to raise prices, leading to an increase in the inflation rate.

In the Long Run,a Negative Real Shock Will Cause the Inflation