If a Positive Inflation Shock Occurs and Monetary Policymakers Do

question 87

Multiple Choice

If a positive inflation shock occurs and monetary policymakers do not change the inflation target:

• A)Output will return to potential output and inflation will equal the inflation target
• B)Output will rise above potential output while inflation will equal the inflation target
• C)Output will fall below potential output while inflation will equal the inflation target
• D)Output will return to potential output and but inflation will exceed the inflation target

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Definitions:

Working Memory

A cognitive system responsible for temporarily holding information available for processing tasks such as reasoning and comprehension.

Long-term Memory

A type of memory capable of storing an unlimited amount of information for periods ranging from several minutes to a lifetime.

Limited Capacity

The theory that suggests human cognitive processing power is finite and can only handle a limited amount of information at one time.

Interpersonal Orientation

Refers to an individual's patterns or styles of interacting with others and may influence social relationships.