In the long run, following a combination of a negative demand shock and a temporary negative supply shock,
A) both inflation and output return to the original long-run equilibrium values.
B) inflation is permanently increased, while output returns to potential output.
C) output returns to potential output, while inflation may be higher or lower than its initial value.
D) inflation is permanently reduced, while output returns to potential output.
E) None of the above.
D
You might also like to view...
Markets for pollution rights
a. have never been tried in the United States b. assign property rights to those who value them least c. allow the government to assign property rights d. enable those who value them most to pollute e. are less efficient than pollution standards
If an economy's capital stock is greater at the end of the year than at the beginning of the year, over this period,
a. net investment has been positive. b. depreciation has exceeded net investment. c. depreciation has exceeded gross investment. d. net investment has exceeded gross investment.