When a Demand Shock Occurs in the Short Run, Monetary

question 45

True/False

When a demand shock occurs in the short run, monetary policy may focus on either output or income, since the effect is the same as focusing on price stability.

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Definitions:

Conservation

A cognitive ability, described by Piaget, where a child realizes that properties such as mass, volume, and number remain the same despite changes in the forms of objects.

Egocentrism

The inability to differentiate between self and other, often seen in early child development stages.

Sensorimotor

Pertaining to a developmental stage in early childhood where learning occurs through the sensory and motor experiences.

Cognitive Development

The process of growth and change in intellectual/mental abilities such as thinking, reasoning, and understanding.