In the Short Run,if Current Output Remains Persistently Above Potential

question 63

Multiple Choice

In the short run,if current output remains persistently above potential ________.

• A)inflation will rise causing a movement along the aggregate supply curve
• B)expected inflation will rise causing an upward shift of the aggregate supply curve
• C)the aggregate supply curve will shift until current output returns to its potential level
• D)all of the above
• E)none of the above

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Definitions:

Risk-Free Rate

The theoretical rate of return of an investment with zero risk of financial loss.

Call Option

An agreement that grants the purchaser the option, not the compulsion, to acquire an asset at a predetermined price during a defined timeframe.

Exercise Price

The specified price at which the holder of an option can buy (call option) or sell (put option) the underlying security or commodity.

Risk-Free Rate

The theoretical return on an investment with no risk of financial loss, typically represented by government bonds.