The Random Walk of GDP Theory Argues That If the Effect

question 30

Multiple Choice

The random walk of GDP theory argues that if the effect of a shock to the economy is permanent, it must come from

• A)an unanticipated monetary policy change
• B)a misguided fiscal policy change
• C)irrational expectations
• D)the supply side and not the demand side
• E)the demand side and not the supply side

---

Definitions:

Supply Curve

A graphical representation of the relationship between the price of a good and the quantity of that good that suppliers are willing to produce and sell.

Demand To Supply

This term reflects the relationship and balance between consumer demand for goods and services and the supply provided by producers.

Decrease In Supply

A reduction in the total amount of a good or service that is available to consumers, often leading to higher prices.

Equilibrium Price

The price at which the quantity of a product offered is equal to the quantity of the product demanded, leading to a balance in the market.