The Immediate Effect of a Positive Price Shock That Is

question 59

Multiple Choice

The immediate effect of a positive price shock that is not accommodated in any way by a change in either fiscal or monetary policy is

• A) a reduction of GDP below its potential caused by higher interest rates and the need to maintain equilibrium in the money market.
• B) an equally sudden reduction in prices that negates the need for a correcting recession.
• C) a short boom in which GDP actually climbs above potential to support the inflation caused by the price shock.
• D) a contraction in consumption and investment that keeps GDP at its potential even given the higher prices.
• E) none of the above.

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Definitions:

Children's Understanding

The developmental processes by which children come to comprehend concepts, ideas, and the world around them.

Critical Period

A specific time during development when the organism is particularly sensitive to certain stimuli, making it easier for certain skills or behaviors to be acquired.

Sensitive Period

A stage in an organism's development during which it is more responsive to certain stimuli and capable of learning or adapting in particular ways.

Environmental Input

Any information or stimuli that an organism receives from its surroundings, which can affect its behavior and development.