If the Public Believes That the Commitment to a Nominal

question 51

Multiple Choice

If the public believes that the commitment to a nominal anchor is not credible,the effect of a negative aggregate demand shock is for ________.

• A)short-run aggregate supply to shift down
• B)short-run aggregate supply to remain unchanged
• C)short-run aggregate supply to shift up
• D)inflation,but not economic activity,to decrease

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Definitions:

After Tax

Pertains to the amount of money left over or the value of transactions after all applicable taxes have been subtracted.

Perpetuity Rate of Return

The rate at which an infinite series of cash flows, received indefinitely, is discounted to equate its present value.

Stated Dividend

The amount of dividend that a company declares to be paid out to its shareholders, usually expressed as a fixed amount per share.

Cost of Capital

The yield a corporation needs to generate on its investments in order to preserve its market value and draw in financing.