The purpose of a restrictive monetary policy is to
What will be an ideal response?
decrease aggregate demand.
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Which of the following explains why the marginal cost pricing rule results in an economic loss for a natural monopoly?
A) The ATC curve is downward sloping throughout the relevant range, therefore the MC is lower than the ATC. B) The demand curve is downward sloping, therefore price falls as quantity increases. C) The MC is constant and equal to price. D) Because output is determined by setting MC equal to the price, consumer surplus is maximized. E) The firm's MR is always less than its price.
In the traditional Keynesian model, a tax cut
A) causes the C + I + G + X line to shift upward. B) causes the C + I + G + X line to shift downward. C) causes a movement along the C + I + G + X line. D) does not affect the C + I + G + X line.
The Keynesian approach, with its focus on aggregate demand and sticky prices, has proven useful in understanding how the economy fluctuates in the short run and why recessions and
a. natural unemployment occur. b. cyclical unemployment occur. c. structural unemployment occur. d. full unemployment occur.
The median voter model predicts that
A) both candidates in a two-person race will definitely move toward the middle of the political spectrum as the election approaches. B) the candidate (in a two-person race) closer to the middle of the political spectrum (closer to the median voter) on election day will win the election. C) conservatives have a higher probability of winning elections than liberals. D) liberals have a higher probability of winning elections than conservatives. E) voters will often be rationally ignorant of important political issues.