What Is the Main Difference Between a Temporary and Permanently

question 6

Multiple Choice

What is the main difference between a temporary and permanently negative supply shock?

• A)The real interest rate immediately decreases after a temporary shock while it eventually increases after a permanent shock.
• B)Output increases right away after a temporary shock but the impact does not last whereas for a permanent shock output permanently decreases.
• C)A temporary shock will see a permanent increase in inflation while inflation will only rise temporarily after a permanent shock.
• D)all of the above
• E)none of the above