The Difference in Outcomes Occurring with a Credible Nominal Anchor

question 7

Multiple Choice

The difference in outcomes occurring with a credible nominal anchor and without one, given a negative aggregate demand shock is that ________.

• A) with the credible policy there is no shift in the aggregate supply curve
• B) there is no difference but credibility provides national security
• C) without credible policy, inflation will continue to spiral upwards
• D) with credible policy, the aggregate supply curve shifts back quickly

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Definitions:

Labor Supply Curve

The graphical representation of the relationship between different levels of wage and the quantity of labor willing to be supplied.

Monopsony

A market situation where there is only one buyer facing many sellers.

Economic Rent

Earnings exceeding the minimum amount required to keep a factor of production in its current use.

Factor Supply

The total amount of various inputs (like labor, capital, and natural resources) available in the economy for production processes.