The longrun result of a nonaccommodative policy in response to an adverse supply shock

A- keeps the interest rate, output and inflation constant.

B-temporarily increases both the interest rate and output to keep inflation constant.

C-permanently increases interest rates and permanently reduces output to keep inflation constant.

D-temporarily increases the interest rate and temporarily reduces output to hold inflation constant.

2.

The component of aggregate expenditure that is not affected by a change in the real interest rate is

consumption.

investment.

government purchases.

net exports.

3

The expenditure shock that shifts the AE curve to the left is

a tax increase.

increased government purchases.

a boom in foreign countries.

an increase in consumer confidence.

4

Adaptive expectations of inflation are based upon

the actions of the central bank.

forecasts of future inflation.

news about changes that may affect inflation.

5

Inflation will fall when

output rises above potential output.

actual output and potential output are equal.

unemployment falls.

unemployment increases.