Figure: Short-Run and Long-Run Effects of Monetary Policy Refer

question 165

Multiple Choice

Figure: Short-Run and Long-Run Effects of Monetary Policy Refer to Figure: Short-Run and Long-Run Effects of Monetary Policy. If the economy is initially at E₂ and the central bank makes no change in its monetary policy:

• A) AD₂ will shift to the right, increasing the existing inflationary gap.
• B) AD₂ will shift to the left, closing the inflationary gap.
• C) SRAS₁ will eventually shift to the left, closing the existing inflationary gap but raising the aggregate price level.
• D) SRAS₂ will immediately shift to the right, increasing the existing inflationary gap.

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Definitions:

Construct Revision

The process of reevaluating and adjusting personal cognitive frameworks or beliefs based on new information or experiences.

Fixed Role Therapy

A therapeutic approach where individuals adopt and act out roles that are different from their usual self.

Undesirable Constructs

These are elements or concepts perceived negatively due to their implications or effects in a specific context.

Fictitious Person

A fabricated or imaginary character that does not exist in reality, often created in literature, movies, or other forms of storytelling.