If a Positive Inflation Shock Occurs and Monetary Policymakers Do

question 100

Multiple Choice

If a positive inflation shock occurs and monetary policymakers do not change the inflation target:

• A) output will eventually return to potential output and inflation will equal the inflation target.
• B) output will eventually rise above potential output while inflation will equal the inflation target.
• C) output will eventually fall below potential output while inflation will equal the inflation target.
• D) output will eventually return to potential output but inflation will exceed the inflation target.

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Definitions:

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