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What Would a Central Bank Need to Do to Reverse

question 52

Essay

What would a central bank need to do to reverse the effects of a favorable supply shock on inflation? What would its reaction do to the unemployment rate in the short run?


Definitions:

Cognitive appraisal

The process of evaluating a situation in relation to personal well-being, which plays a role in determining the emotional reaction to the situation.

Cognitive restructuring

A therapy technique in cognitive behavioral therapy that aims to help individuals identify and challenge irrational or maladaptive thoughts and replace them with more adaptive ones.

Activating event

In cognitive behavioral therapy, an event that triggers a cognitive or emotional response, leading to specific behavioral outcomes.

Control

In experimental research, it refers to the standard against which the effects of a test are compared.

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