If There Is a Permanent Adverse Supply Shock

Multiple Choice

If there is a permanent adverse supply shock

A) the rate of inflation can be held constant if real wages are kept from falling.
B) an extinguishing policy will produce an acceleration of inflation.
C) the level of employment at the natural level of real GDP will remain constant only if the labor supply curve is upward sloping to the right.
D) a policy of accommodation at the original natural level of real GDP is not possible without an acceleration of inflation.