In the standard AS-AD framework, after a positive one-period O for all times T > t), the inflation shock at time t (that is, ō, economy will move to a new equilibrium with = Tt+1 - Tt = 0 because %3D the AS curve immediately shifts such that the AS and AD curves intersect at Y = 0. Any shock is offset completely by an opposing inflation shock. the AD curve shifts each period. Changes in the rate of inflation are matched by changes in the demand parameter ā. the AS curve gradually shifts in the direction of Y = 0. Changes in inflation affect the intercept of the AS curve. the AD curve adjusts over time. Changes in expected inflation move the intercept term of the AD curve. O the AS curve never shifts in response to shocks in the economy.

In the standard AS-AD framework, after a positive one-period O for all times T > t), the inflation shock at time t (that is, ō, economy will move to a new equilibrium with = Tt+1 - Tt = 0 because %3D the AS curve immediately shifts such that the AS and AD curves intersect at Y = 0. Any shock is offset completely by an opposing inflation shock. the AD curve shifts each period. Changes in the rate of inflation are matched by changes in the demand parameter ā. the AS curve gradually shifts in the direction of Y = 0. Changes in inflation affect the intercept of the AS curve. the AD curve adjusts over time. Changes in expected inflation move the intercept term of the AD curve. O the AS curve never shifts in response to shocks in the economy.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section20.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 4SQP

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