Starting from a long-run equilibrium,immediate or eventual increases in the rate of inflation may be the result of any of the following EXCEPT
A) an upward inflation shock.
B) a positive shock to potential output.
C) an increase in government purchases.
D) a monetary "easing."
E) a tax decreasE.

Question

Quizplus · Accepted Answer

A positive shock to potential output would lead to a decrease in inflation, not an increase. The other options could potentially lead to an increase in the rate of inflation.

Starting from a Long-Run Equilibrium,immediate or Eventual Increases in the Rate