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

question 52

Multiple Choice

Suppose that there is a positive 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) over time inflation will fall back down to the inflation target
• D) all of the above
• E) A and B only

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Definitions:

Corporate Form

A legal structure of organization designated to conduct business, which can limit the liability of shareholders and associates with various tax rules.

Taxes

Mandatory financial charges imposed by governments on individuals, corporations, and transactions.

Secondary Market

A marketplace where investors buy and sell securities they already own, which were previously issued in the primary market.

Common Shares

Common Shares represent ownership interests in a corporation, granting holders voting rights and a share in the company's profits through dividends and capital appreciation.