A Supply Shock That Is Not Responded to with an Expansionary

question 77

Multiple Choice

A supply shock that is not responded to with an expansionary policy will result in

• A)a one-time increase in the price level, but not inflation.
• B)neither a one-time increase in the price level nor inflation.
• C)both a one-time increase in the price level and inflation.
• D)inflation, but not a one-time increase in the price level.

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Definitions:

IRR

Internal Rate of Return; a metric used in financial analysis to estimate the profitability of potential investments.

Base-Case

A scenario used as a benchmark in analysis, representing the default or most likely set of assumptions.

Sensitivity Analysis

A technique used to determine how different values of an independent variable will affect a particular dependent variable under a given set of assumptions.

Forecasting Risk

The potential for actual outcomes to differ significantly from predicted outcomes in business or financial forecasting models.