If There Is a Permanent Adverse Supply Shock

question 30

Multiple Choice

If there is a permanent adverse supply shock

• A)the rate of inflation can be held constant if real wages are kept from falling.
• B)an extinguishing policy will produce an acceleration of inflation.
• C)the level of employment at the natural level of real GDP will remain constant only if the labor supply curve is upward sloping to the right.
• D)a policy of accommodation at the original natural level of real GDP is not possible without an acceleration of inflation.

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