When the Economy Is Hit by a Temporary Negative Supply

question 3

Multiple Choice

When the economy is hit by a temporary negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy,then in the long run

• A)inflation will be lower.
• B)output will be at its potential.
• C)output will be lower.
• D)inflation will be unchanged.
• E)both B and D.

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Definitions:

Cramér's V

A measure of association between two nominal variables, giving a value between 0 and 1 that indicates the strength of the relationship.

Expected Frequency

The anticipated count in each category of a contingency table under the assumption that the null hypothesis is true, used in chi-square tests.

Null Hypothesis

The null hypothesis is a statement in statistical analysis that proposes no significant effect or no difference as the outcome of an experiment or study.

Level of Significance

The probability threshold under which the null hypothesis is rejected in hypothesis testing, denoted as alpha.