An Inflation Shock Is

question 119

Multiple Choice

An inflation shock is

• A) the level of inflation consistent with output in a recessionary gap.
• B) the level of inflation consistent with output in an expansionary gap.
• C) a sudden change in the normal behaviour of inflation,unrelated to the nation's output gap.
• D) a change in the inflation rate generated by excessive aggregate demand.
• E) a change in inflation brought about by changes in inflation expectations and pricing decisions.

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Definitions:

Absolute Advantage

The ability of a country, individual, company, or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service.

Productive Advantage

Occurs when a country, business, or individual produces a good or service at a lower opportunity cost than competitors, leading to more efficient production.

Comparative Advantage

The capacity of a person, business, or nation to create a product or offer a service with a lesser opportunity cost compared to its rivals.

Production

The process of creating goods and services through the combination of labor, materials, and technology.