If There Is a Permanent Adverse Supply Shock

question 30

Multiple Choice

If there is a permanent adverse supply shock

• A)the rate of inflation can be held constant if real wages are kept from falling.
• B)an extinguishing policy will produce an acceleration of inflation.
• C)the level of employment at the natural level of real GDP will remain constant only if the labor supply curve is upward sloping to the right.
• D)a policy of accommodation at the original natural level of real GDP is not possible without an acceleration of inflation.

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Definitions:

Maker Of A Will

Person who creates a legal document that outlines how their property should be distributed upon their death.

Perfect Substitutes

Goods or services that can be used in place of each other with no loss of utility to the consumer.

Perfect Complements

Two goods for which the Marginal Rate of Substitution (MRS) is zero or infinite; the indifference curves are shaped as right angles.

Good X

A generic term often used in economic models to represent a specific product or commodity in the market.