The Short Run Aggregate Supply Curve Assumes That in the Short-

question 41

Multiple Choice

The short run aggregate supply curve assumes that in the short- run:

• A) the inflation rate is zero, that is, the economy is stagflated.
• B) the unemployment rate is equal to the natural rate of unemployment.
• C) the economy does not experience supply shocks.
• D) prices are slow to adjust.

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Definitions:

Indexed

A term referring to the adjustment of income, benefits, or prices in accordance with changes in a price index, typically to preserve purchasing power.

Inflation

A sustained increase in the general price level of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money.

Fed Tightened

Refers to the Federal Reserve's actions to reduce the money supply and raise interest rates to control inflation.

Monetary Policy

The actions of a central bank, currency board, or other regulatory committees that determine the size and rate of growth of the money supply, which in turn affects interest rates.