Explain two strengths of monetary policy for achieving economic stability.
What will be an ideal response?
Monetary policy is relatively speedy and flexible relative to fiscal policy because the decision-making body is smaller and the decisions to change monetary policy can be implemented immediately. A second strength is that monetary policy is largely removed from political pressure since the members of the Board of Governors are appointed to 14-year terms. Unpopular, but necessary, changes can thus be made which might not be possible with fiscal policy where the decision makers are elected officials who may be reluctant to make unpopular decisions.
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All of the following are true regarding a long-term contract between an upstream firm and a downstream firm except which one?
A) The downstream firm can incur opportunity costs. B) The upstream firm can incur opportunity costs. C) Both firms have increased flexibility. D) Changes in market conditions can impose new costs to either firm.
Workers usually negotiate compensation in terms of the nominal wage because wage agreements are based on expected price levels
a. True b. False Indicate whether the statement is true or false
The principal way in which an economy self-corrects from an inflationary gap is through
a. deflation, which increases purchasing power. b. inflation, which reduces purchasing power. c. disinflation, which maintains purchasing power. d. price level decreases, which stimulate production.
Consumers buy more normal goods as their incomes rise.
Answer the following statement true (T) or false (F)