If the Economy Is Faced with Continued Negative Supply Shocks

question 16

Multiple Choice

If the economy is faced with continued negative supply shocks, such as annual wage increases for unionized workers, and there is no monetary validation, we can expect

• A)an inflationary gap.
• B)peace in labour- management relations.
• C)a shrinking output gap.
• D)rising unemployment until the wage increases cease, or are offset by other wage decreases.
• E)a one- time rise in the price level.

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Definitions:

Forecast Error

The difference between the actual demand and the forecasted demand, indicating the accuracy of forecasting methods.

Moving Average

A statistical method used to analyze data points by creating a series of averages of different subsets of the full data set.

Excel Function

A predefined formula in Microsoft Excel that performs calculations using specific values in a particular order.

Mean Absolute Deviation

A statistical measure that quantifies the average absolute deviation of data points from their mean, used to gauge variability within a dataset.