If a Positive Aggregate Demand Shock Occurs and Monetary Policy

question 76

Multiple Choice

If a positive aggregate demand shock occurs and monetary policy is not credible then ________.

• A) inflation will increase
• B) the equilibrium interest rate will fall
• C) there will be a corresponding autonomous decrease in aggregate supply
• D) none of the above

---

Definitions:

Statute of Frauds

A legal principle that requires certain types of contracts to be in writing and signed by the parties involved in order to be enforceable.

Guarantor

An individual or entity that guarantees to pay a borrower's debt in the event the borrower defaults on a loan obligation.

Oral Promise

A commitment made through spoken words which, in certain circumstances, can be legally binding, though harder to prove than written contracts.

Garnishment

A legal process by which a creditor can collect what a debtor owes by requiring a third party to turn over the debtor's property or wages.