840 $
© 2014 Pearson Canada Inc.$
If a negative aggregate demand shock occurs and monetary policy is not credible then
____.
A) economic activity will decrease
B) the equilibrium interest rate will rise
C) there will be a corresponding autonomous increase in inflation
D) none of the above
Answer: A
Diff: 2 Type: MC Page Ref: 626
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
A negative aggregate demand shock will only impact ____.
A) the equilibrium interest rate
B) the equilibrium inflation rate
C) the short run aggregate supply curve
D) none of the above
Answer: D
Diff: 2 Type: MC Page Ref: 626
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
An example of a negative aggregate demand shock is ____.
A) a global carbon cap-and-trade program
B) a global financial crisis
C) a decrease in the price of oil
D) thermonuclear war
Answer: B
Diff: 2 Type: MC Page Ref: 626
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates
The difference in outcomes occurring with a credible nominal anchor and without one, given
a negative aggregate demand shock is that ____.
A) with the credible policy there is no shift in the aggregate supply curve
B) there is no difference but credibility provides national security
C) without credible policy, inflation will continue to spiral upwards
D) with credible policy, the aggregate supply curve shifts back quickly
Answer: A
Diff: 2 Type: MC Page Ref: 626
Skill: Recall
Objective List: 26.2 Characterize the discretionary versus nondiscretionary and rules versus
discretion policy debates