question archive Suppose the short-run AS curve is given by: π(t) = π(t-1) + ε(t) If there is a temporary (one-period) favourable inflation shock (ε < 0), in the short-run; A
Suppose the short-run AS curve is given by: π(t) = π(t-1) + ε(t) If there is a temporary (one-period) favourable inflation shock (ε < 0), in the short-run; A
Subject:EconomicsPrice: Bought3
Suppose the short-run AS curve is given by:
π(t) = π(t-1) + ε(t)
If there is a temporary (one-period) favourable inflation shock (ε < 0), in the short-run;
A. The inflation rate will increase for one-period and then immediately return to its pre-shock value.
B. The inflation rate will decrease for one-period and then immediately return to its pre-shock value.
C. The inflation rate will increase when the shock occurs and remain at a new higher level
D. The inflation rate will decrease when the shock occurs and remain at a new lower level
E. None of the above
