As it is usually practiced, inflation targeting sets
a. a specific inflation rate for the central bank to target and prohibits it from deviating from the target even when some shock pushes inflation away from that number.
b. a specific inflation rate for the central bank to target but allows it to deviate from the target when some shock pushes inflation away from that number.
c. sets some range of inflation rates for the central bank to target and prohibits it from deviating from that range even when some shock pushes inflation outside the range.
d. sets some range of inflation rates for the central bank to target but allows it to deviate from that range when some shock pushes inflation outside the range.
b
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Sellers respond to a shortage by cutting their prices
a. True b. False Indicate whether the statement is true or false
If the economy is operating at full employment when its aggregate demand curve is AD2, then a further increase in consumption and investment spending will cause:
Refer to the figure above.
A. Cost-push inflation, and the new equilibrium output will be less than Q2
B. Demand-pull inflation, and the new equilibrium output will be less than Q2
C. Demand-pull inflation, and the new equilibrium output will be more than Q2
D. Cost-push inflation, and the new equilibrium output will be more than Q2