When a price shock has occurred, inflation returns to its pre-shock rate ________
A) in the period following the price shock
B) in the period when output has returned to its pre-shock rate
C) once the output gap has returned to zero
D) only in the long run
E) none of the above
E
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The figure above shows the market for milk. The ________ price that producers must be offered to get them to produce 250 gallons of milk per day is ________
A) maximum; $3.25 B) minimum; $3.25 C) maximum; $2.50 D) minimum; $2.50
According to the Coase theorem, part of what is needed for private transactions to be efficient is that property rights
A) must be defined, but it does not matter who owns the property. B) must be defined, and it is crucial as to who owns the property. C) need not be defined as long as there are no transactions costs present. D) need to be defined by the government to avoid producers from exploiting high transactions costs.