True or false: A one-period-long supply shock results in a permanent upward shift in the Aggregate Supply (AS) curve, leading to a sustained increase in the inflation rate and a decrease in the output gap.

Answer 1

False. A one-period-long supply shock may cause a temporary shift in the Aggregate Supply curve, which can lead to a temporary increase in the inflation rate and a decrease in the output gap. However, the effects are not necessarily permanent and may revert back to their original levels over time.