Explain What Happens to the Inflation Adjustment Line in the Long

question 69

Essay

Explain what happens to the inflation adjustment line in the long run in each of the following cases.
(A)The economy sinks into a recession.
(B)Firms expect the Fed will adjust monetary policy and allow inflation to rise from 2 percent to 4 percent.
(C)OPEC successfully doubles the price of oil on the market.
(D)Congress cuts taxes.
(E)Potential GDP increases.

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Definitions:

Par Value

The nominal or face value of a bond, stock, or coupon as stated by the issuer, which is typically not indicative of its market value.

Stated Value

A nominal value assigned by a company to its issued shares, which may be above or below the market value.

Shares

Units of ownership in a company, typically traded on a stock exchange, representing a portion of the corporate equity.

Treasury Stock

Shares that were issued and later reacquired by the issuing company.