The GDP deflator can be used to take inflation out of nominal GDP
a. True
b. False
Indicate whether the statement is true or false
True
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Donuts and coffee are complements. When the price of a donut increases, the demand for coffee ________ and the cross elasticity of demand for coffee with respect to the price of a donut is ________
A) decreases; negative B) increases; negative C) increases; positive D) decreases; positive
Markets may not work well due to
a. lack of factor mobility b. high degree of monopoly c. weak legal infrastructure d. government regulation e. all of the above
The relationship between annual real per-capita GDP and corruption across countries has been found to be
A) negative. B) positive. C) The relationship was negative in the late 1960s but is now positive. D) The relationship was in the late 1960s but is now negative. E) There is no relationship between these two variables.
Suppose the Fed cares only about keeping the economy close to full-employment output. The Fed can target the real money supply (thus keeping the LM curve fixed) or it can target the real interest rate, changing the money supply and shifting the LM curve however is necessary to prevent a change in the real interest rate.(a)Which is the best policy if the main shocks to the economy are shocks to the IS curve? Explain why. Illustrate with a diagram.(b)Which is the best policy if the main shocks to the economy are shocks to real money demand? Explain why. Illustrate with a diagram.
What will be an ideal response?