Beginning at Long-Run Equilibrium in the Dynamic Model of Aggregate

question 30

Multiple Choice

Beginning at long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, if the central bank permanently reduces its inflation target, then in the initial period after the policy change, output _____, and inflation _____.

• A)increases; increases
• B)increases; decreases
• C)decreases; decreases
• D)decreases; increases

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