In the Dynamic Model of Aggregate Demand and Aggregate Supply $\theta$

question 8

Multiple Choice

In the dynamic model of aggregate demand and aggregate supply, if the central bank chooses a large value of $\theta$ _$\pi$ , the responsiveness of nominal interest rates to inflation, and a small value of $\theta$ _Y, the responsiveness of nominal interest rates to output, then the DAD curve will be relatively _____, and supply shocks will have relatively ____ impacts on inflation than output.

• A) flat; larger
• B) flat; smaller
• C) steep; larger
• D) steep; smaller

---

Definitions:

Essential Elements

Fundamental components or factors that are necessary for a specific process, activity, or system to function effectively.

Established Jointly

Refers to being set up or founded by two or more parties in collaboration.

Psychoanalysis

A therapeutic approach that focuses on exploring unconscious desires and conflicts as a means of understanding and resolving psychological disturbances.

Repression

A defense mechanism in which distressing thoughts and memories are unconsciously forced from the conscious mind to the unconscious.