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

question 14

Multiple Choice

Suppose that there is a negative aggregate demand shock and the central bank commits to an inflation rate target. If the commitment is credible,then

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

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Definitions:

Journal Entries

The record of financial transactions as they occur, detailing the accounts that are affected and in what way.

Receipt

A document acknowledging that a payment has been made or that goods have been received.

Supplies Expense

The cost associated with consumable items used during the process of operating a business, recorded as an operating expense on the income statement.

Supplies Order

The process of acquiring necessary materials or goods required for the operation of a business or execution of a task.