The Difference in Outcomes Occurring with a Credible Nominal Anchor

question 13

Multiple Choice

The difference in outcomes occurring with a credible nominal anchor and without one, given a negative aggregate supply shock is that ________.

• A) the overall economic outlook is better
• B) there is no difference but credibility provides national security
• C) without credible policy, inflation will continue to spiral upwards
• D) with credible policy, the aggregate supply curve shifts back quickly