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Which of the following components is NOT included in the equation for the short-run
aggregate supply curve?
A) Nominal interest rate
B) Inflation
C) Expected inflation
D) Output gap
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
With a negative aggregate supply shock, monetary policy credibility can ____.
A) produce a better outcome
B) set inflation equal to zero
C) determine the effective interest rate
D) prevent financial malfeasance
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
If a negative aggregate supply shock occurs and monetary policy is not credible then
____.
A) inflation will higher and output lower than with credible policy
B) the equilibrium interest rate will fall
C) there will be a corresponding autonomous decrease in aggregate supply
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 supply shock will impact ____.
A) the equilibrium output
B) the equilibrium inflation rate
C) the short run aggregate supply curve
D) all 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