Starting from Long-Run Equilibrium, Without Policy Intervention, the Long-Run Impact

question 66

Multiple Choice

Starting from long-run equilibrium, without policy intervention, the long-run impact of an adverse supply shock is that prices will:

• A) be permanently higher and output will be restored to the natural rate.
• B) return to the old level and output will be restored to the natural rate.
• C) be permanently higher and output will be permanently lower.
• D) return to the old level, but output will be permanently lower.

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