Suppose That There Is a Positive Aggregate Demand Shock and the Central

question 29

Multiple Choice

Suppose that there is a positive aggregate demand shock and the central bank commits to an inflation rate target. If the commitment is credible, then ________.

• A) the public's expected inflation will remain unchanged
• B) the short-run aggregate supply curve will not shift
• C) over time inflation will fall back down to the inflation target
• D) all of the above
• E) A and B only

---

Definitions:

German Scientists

Scientists from Germany who have contributed significantly to various fields of study, including physics, chemistry, biology, and engineering, among others.

New Deal

A series of programs and projects instituted during the Great Depression by President Franklin D. Roosevelt with the aim of restoring prosperity to Americans.

Unregulated Free Market

An economic system without governmental oversight where prices are determined by unrestricted competition between privately owned businesses.

Consumer Individualism

A societal trend where individual consumers have the freedom to express themselves and make independent choices in the marketplace, reflecting personal identities and preferences.