If the Government Raises the Growth of Nominal GDP in Response

question 108

Multiple Choice

If the government raises the growth of nominal GDP in response to a supply shock

• A) inflation will decelerate and unemployment will fall.
• B) inflation will accelerate and unemployment will worsen.
• C) employment can be maintained so long as expectations are unaffected by the supply shock.
• D) none of these results follow an increase in the growth of nominal GDP

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Definitions:

Reaction Function

A concept in game theory and economics that specifies how one player's strategy changes in response to the strategy of another player.

Demand Function

An illustrative model that displays the amount of a product buyers are prepared and capable of buying at different price levels.

Pumpkins

A plant belonging to the squash family, often used for food, decoration, or as commodities in agricultural markets.

Constant Marginal Cost

A situation where the cost of producing an additional unit of output is the same, regardless of the volume produced.