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:

Negative Attributions

A cognitive process where individuals attribute negative motives or characteristics to others' behavior, leading to potentially biased perceptions.

Constructive Action

An approach or behavior aimed at creating positive outcomes or proposing solutions, rather than merely criticizing or highlighting problems.

Self-fulfilling Prophecy

A belief or expectation that influences one's behavior in a way that causes the belief to become true.

Internal Factors

refer to elements within an organization such as its culture, policies, and employee morale, that can impact its operations and success.