Inflation - Inflation Shocks
3 important questions on Inflation - Inflation Shocks
What is an inflation shock?
A sudden change in normal inflation behavior that is unrelated to the nation's output gap.
What is an aggregate supply shock?
A sudden event that alters the cost of capacity for producing goods and services.
How do shocks to potential output affect the economy?
They raise production costs temporarily and change the long-run aggregate supply permanently.
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