In 1981 Fed policy created a severe recession because the Fed
A) publicly announced an inflation increase program.
B) undertook an unexpected increase in the inflation rate.
C) undertook an unexpected reduction in the inflation rate.
D) publicly announced an inflation reduction program.
E) increased aggregate supply to reduce the inflation rate.
C
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The amount of a tax paid by the sellers will be smaller the more ________ the demand and the more ________ the supply
A) elastic; inelastic B) inelastic; elastic C) inelastic; inelastic D) elastic; elastic
If the price of grapefruit rises, the substitution effect due to the price change will cause
A) a decrease in the demand for oranges, a substitute for grapefruit. B) a decrease in the quantity of grapefruit demanded. C) a decrease in the quantity of grapefruit supplied. D) a decrease in the demand for grapefruit.
Suppose the output gap is zero, and policy makers wish to reduce the inflation rate from 10 percent to 5 percent. Which of these policies seems best?
A) contractionary policies to reduce output at least 5 percent below potential output B) a convincing declaration of the inflation rate target, so that expected inflation falls to 5 percent C) no policy action; inflation will fall on its own, eventually D) no policy action; inflation will converge to its long-run rate, regardless of policy E) price and wage controls to counteract their stickiness
Which of the following is characteristic of a perfectly competitive market? a. There is free entry into and exit from the market
b. Individual firms can exert a perceptible influence on the market price. c. Firms in the market produce a differentiated product. d. All of the above are true.