When the Economy Suffers a Temporary Negative Supply Shock,the Central

question 20

Multiple Choice

When the economy suffers a temporary negative supply shock,the central bank's autonomous monetary policy to keep inflation at the target inflation rate leads to

• A)more stable economic activities.
• B)a large deviation of output from its potential.
• C)divine coincidence.
• D)both B and C.

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Definitions:

Economic Profit

The gap between the total income a company makes and all of its expenses, covering both direct and indirect costs.

Optimal Output

The level of production that maximizes a firm's profits, where marginal revenue equals marginal cost.

Economic Profit

The contrast between a corporation's entire earnings and its full expenses, including both tangible and intangible costs.

Average Variable Cost

entails the calculation of the unit cost for variable expenses associated with production, adjusted for changes in output levels, providing insight into economies of scale.