The structure of the short-run model is best described as which of the following?
A) Nominal interest rate $\rightarrow$ Real interest rate $\rightarrow$ Short-run output $\rightarrow$ Change in inflation
B) Nominal interest rate $\rightarrow$ Real interest rate $\rightarrow$ Change in inflation
C) Nominal interest rate $\rightarrow$ Short-run output $\rightarrow$ Change in inflation
D) Real interest rate $\rightarrow$ Short-run output $\rightarrow$ Change in inflation $\rightarrow$ Nominal interest rate
E) Short-run output $\rightarrow$ Change in inflation $$\rightarrow$$ Real interest rate $$\rightarrow$$ Nominal interest rate

Question

Quizplus · Accepted Answer

The short-run model typically involves the nominal interest rate affecting the real interest rate, which in turn influences short-run output, and subsequently leads to changes in inflation.

The Structure of the Short-Run Model Is Best Described as Which