A. How is the AS curve affected in the short run? The AS curve will: shift to le

Question

A. How is the AS curve affected in the short run?
The AS curve will: shift to left or remain unchanged or shift to right,
B . If the fed accommodates the favorable inflation shock, it will follow a :
Tight monetary policy, AD will shift to the left, output will be equal to potential output, and inflation will be lower.
Loose monetary policy, AD will shift to the right, output will be higher than potential output, and inflation will be lower

Tight monetary policy, AD will shift to the left, output will be higher than potential output, and inflation will be higher
Loose monetary policy, AD will shift to the right, output will be less than potential output, and inflation will be higher Suppose the economy is initially in long run equilibrium and experiences a favorable inflation stock. A. How is the AS curve affected in the short run? The AS curve will: shift to left or remain unchanged or shift to right, B . If the fed accommodates the favorable inflation shock, it will follow a : Tight monetary policy, AD will shift to the left, output will be equal to potential output, and inflation will be lower. Loose monetary policy, AD will shift to the right, output will be higher than potential output, and inflation will be lower Tight monetary policy, AD will shift to the left, output will be higher than potential output, and inflation will be higher Loose monetary policy, AD will shift to the right, output will be less than potential output, and inflation will be higher

Explanation / Answer

A.

A favorable inflation shock shifts the AS curve down to the right, so that inflation falls at any level of output.

B.

If the Fed accommodates the favorable inflation shock, it will follow a Tight monetary policy, AD will shift to the left, output will be equal to potential output, and inflation will be lower.

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