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

question 79

Multiple Choice

In the dynamic model of aggregate demand and aggregate supply, if the central bank chooses a small value of $\theta$ _$\pi$ , the responsiveness of nominal interest rates to inflation, and a large 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

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