25. Suppose an economy exhibits a large unexpected decrease in productivity growth that lasts for a decade. However, monetary policymakers are slow to recognize that the change is to potential, not current, output and interpret the decrease in output as a recession that leads current to fall below potential output. In this scenario, policymakers believe that building and incorrectly respond by interest rates, sending the economy into a(n) pressures are gap. a. inflationary; raising; inflationary b. inflationary; reducing; inflationary c. inflationary; raising; recessionary d. recessionary; reducing; inflationary e. Not enough information is given.

25. Suppose an economy exhibits a large unexpected decrease in productivity growth that lasts for a decade. However, monetary policymakers are slow to recognize that the change is to potential, not current, output and interpret the decrease in output as a recession that leads current to fall below potential output. In this scenario, policymakers believe that building and incorrectly respond by interest rates, sending the economy into a(n) pressures are gap. a. inflationary; raising; inflationary b. inflationary; reducing; inflationary c. inflationary; raising; recessionary d. recessionary; reducing; inflationary e. Not enough information is given.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter27: Issues In Macroeconomic Theory And Policy

Section: Chapter Questions

Problem 4P

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