The Second Round Increase in Inflation Following an Adverse Supply

question 14

Multiple Choice

The second round increase in inflation following an adverse supply shock is the result of:

• A)shifts in potential output.
• B)increases in the Federal Reserve's target real interest rate.
• C)decreases in the Federal Reserve's target real interest rate.
• D)increases in long-term inflationary expectations.

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Definitions:

Quantitative Model

A representation of a real situation in numerical terms, often used to forecast future behavior, outcomes, or trends based on historical data.

Qualitative Model

A framework for analysis that uses non-numeric data to understand patterns, concepts, opinions, or experiences.

Demand Forecast

The estimation of the quantity of a product or service that consumers will purchase in the foreseeable future.

Regression Analysis

A method in statistics employed to explore how a dependent variable interacts with one or several independent variables.