If the Short-Run Aggregate Supply Curve Is π = πE

question 60

Multiple Choice

If the short-run aggregate supply curve is π = πe - 1.2 (Y - YP) + ρ, output equals potential output and there is a price shock of minus two, then the inflation rate is ________.

• A) 2
• B) πe - 2
• C) minus 2
• D) minus 2.4
• E) none of the above

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Definitions:

Synaptic Cleft

The small gap at a synapse between neurons, across which neurotransmitters move from one neuron to another.

Terminal Buttons

The small knobs at the end of an axon that release chemicals called neurotransmitters into the synapse, thereby transmitting nerve impulses to another nerve cell.

Cell Membrane

The thin, flexible barrier that surrounds cells, controlling the movement of substances in and out of the cell.

Action Potential

A short-lasting event in which the electrical membrane potential of a cell rapidly rises and falls, facilitating neural communication.