A counterclockwise loop spiraling downward in the SP/LP diagram is the dynamic process typical of ________ policy with inflationary expectations that ________ adjust.
A)inflationary,are slow to
B)inflationary,instantly
C)disinflationary,are slow to
D)disinflationary,instantly

Question

Quizplus · Accepted Answer

A counterclockwise loop spiraling downward indicates a disinflationary policy, as the central bank is trying to decrease inflation. However, inflationary expectations are slow to adjust, hence they are "slow to" adjust, making option C the correct choice.

A Counterclockwise Loop Spiraling Downward in the SP/LP Diagram Is