When a permanent negative supply shock hits the economy, a ...

[nramada]

When a permanent negative supply shock hits the economy, a permanently ________.
 
  A) lower equilibrium level of output ensues if the central bank raises interest rates
  B) lower equilibrium level of output ensues if the central bank does not respond
  C) higher equilibrium level of inflation ensues if the central bank does not respond
  D) all of the above
  E) none of the above

Question 2

Multiplier effects occur when there is a change in spending which does not depend on income. Spending which does not depend on income is referred to as
 
  A) coincident spending.
  B) nominal spending.
  C) autonomous expenditures.
  D) induced expenditures.

[Alyson.hiatt@yahoo.com]

Answer to Question 1

D

Answer to Question 2

C

[nramada]

Excellent

[bitingbit]

Gracias!