Suppose That There Is a Negative Aggregate Demand Shock and the Central

question 3

Multiple Choice

Suppose that there is a negative aggregate demand shock and the central bank commits to an inflation rate target. But if the commitment is not credible,then

• A)the public's expected inflation will remain unchanged.
• B)the short-run aggregate supply curve will rise.
• C)economic contraction will be worse.
• D)all of the above.
• E)both B and C.

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Definitions:

Existential Import

The implication that a categorical proposition presupposes the existence of the subject about which it makes a statement.

Traditional View

A perspective or belief that leans towards practices and ideas that are handed down from past generations.

Existential Import

A characteristic of propositions or statements that assert the existence of at least one instance of the subject category.

Traditional View

A perspective or belief that is rooted in long-established customs, values, or methodologies.