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.

---

Definitions:

Total Revenue

Total revenue is the total amount of money received by a company for goods sold or services provided during a certain period.

Foreign Producers

Companies or individuals that produce goods or services in a country other than where the products are consumed.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specified time.

Tariff

A tax imposed on imported goods and services to raise their price, thereby protecting domestic industries from foreign competition.