If the Central Bank Responds to Repeated Negative Supply Shocks

question 58

Multiple Choice

If the central bank responds to repeated negative supply shocks with monetary validations, the economy will be faced with

• A)continuous inflation.
• B)alternating periods of inflation and deflation.
• C)a one- time decrease in prices.
• D)a one- time increase in prices.
• E)steady reductions in real output.

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