The Second Round Increase in Inflation Following an Adverse Supply

question 14

Multiple Choice

The second round increase in inflation following an adverse supply shock is the result of:

• A)shifts in potential output.
• B)increases in the Federal Reserve's target real interest rate.
• C)decreases in the Federal Reserve's target real interest rate.
• D)increases in long-term inflationary expectations.

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Definitions:

Alcohol

A colorless volatile flammable liquid that is the intoxicating constituent of wine, beer, spirits, and other drinks, and used as an industrial solvent and as fuel.

Committee on Public Information

An agency established by the U.S. government during World War I aimed at swaying public sentiment and bolstering backing for the war through the use of propaganda.

George Creel

A journalist and political figure who was appointed to head the U.S. Committee on Public Information during World War I, playing a significant role in the propaganda efforts to support the war among the American people.

Madison Grant

An American author and eugenicist best known for his work "The Passing of the Great Race," which played a significant role in the development of early 20th-century eugenics in the United States.