A Price Shock Occurs When

question 167

Multiple Choice

A price shock occurs when

• A)the monetary policy rule changes.
• B)the Fed acts to raise interest rates.
• C)the spending balance changes.
• D)key commodity prices change.
• E)the AD curve shifts to the right.

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Definitions:

Long-Run Aggregate-Supply Curve

The long-run aggregate-supply curve represents the total production of goods and services in an economy at different price levels, assuming all resources are fully utilized.

Misperceptions Theory

A theory suggesting that individuals' misperceptions about economic conditions can lead to fluctuations in economic output and employment.

Short-Run Aggregate Supply

The total quantity of goods and services that producers in an economy are willing and able to supply at current price levels in the short term.

Inflation

The inflation rate, depicting how rapidly the overall cost of living increases, leading to decreased purchasing efficacy.