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The Economy Shown Here Begins at a 0% Output Gap

Question 2

Multiple Choice

The economy shown here begins at a 0% output gap. A rise in the risk premium by 2% leads to:
The economy shown here begins at a 0% output gap. A rise in the risk premium by 2% leads to: A) unexpected inflation of 0%. B) unexpected inflation of 1%. C) a new output gap of -4%. D) a new real interest rate of 1%.


A) unexpected inflation of 0%.
B) unexpected inflation of 1%.
C) a new output gap of -4%.
D) a new real interest rate of 1%.

Correct Answer:

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