If monetary policymakers do not change their inflation target and aggregate demand shifts left:
A. there will be an increase in inflation in the long run.
B. it will result in a permanent reduction in inflation.
C. there will be a temporary decrease in output.
D. potential output will decrease.
Answer: C
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An economic activity in which benefits or costs affect third parties is called
A) a public good. B) a third-party good. C) the exclusion principle. D) an externality.
Despite the fact that water is necessary to sustain life, it is less expensive than milk. Economic theory suggests that this is so because
A) there is a conspiracy among milk producers to hold prices artificially high. B) although the total utility of water consumption is high, its marginal utility per dollar spent is low when compared to milk. C) consumers are irrational. D) sellers of water hold the price of water artificially low because of its importance.
Answer the question based on the information given in the table below that shows the items and figures taken from a consolidated balance sheet of the twelve Federal Reserve Banks. All figures are in billions of dollars.
In the balance sheet above for the Federal Reserve, the assets would be items 5 and:
A. 1 and 2
B. 2 and 3
C. 3 and 4
D. 4 and 6
Figure 6-5
If the demand curve in Figure 6-5 is unit elastic, then total expenditure at A is ____ total expenditure at B.
A. greater than B. less than C. equal to D. less elastic than