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:

Maintenance Rehearsal

A process of repetitively verbalizing or thinking about information to be remembered, thereby keeping it in working memory longer.

Auditory Encoding

The process by which auditory information is converted into a form that allows it to be stored in memory.

Sensory Storage

A very short-term form of memory that allows the retention of information received through the senses for a brief period.

Visual Image

A mental representation or picture perceived with the mind's eye or created by the brain’s ability to interpret visual information.