The Effect of a Supply Shock on Inflation and Real

question 62

Multiple Choice

The effect of a supply shock on inflation and real GDP

• A)depends on the initial expected rate of inflation.
• B)depends on the response in the growth of nominal GDP.
• C)depends on the level of natural real GDP.
• D)both A and B are correct

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Definitions:

Tax Cutters

Advocates or policies aimed at reducing the level of taxation.

Social Security Tax

A tax levied on both employers and employees to fund the Social Security program, which provides retirement, disability, and survivorship benefits to qualifying individuals.

Medicare Tax

A payroll tax that funds Medicare, providing health insurance to individuals aged 65 and older in the United States.

Salary

A fixed regular payment, typically paid on a monthly or biweekly basis but often expressed as an annual sum, for professional or office work.