If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, then the price ceiling is a binding constraint on the market
a. True
b. False
Indicate whether the statement is true or false
False
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
Two of the main focuses on development economics focuses on how countries can promote:
A. health and education. B. sound monetary policy and education. C. health and fiscal policy. D. sound monetary and fiscal policy.
Positive incentives: a. increase benefits or reduce costs
b. decrease the amount of affected behaviors. c. increase the amount of affected behaviors. d. Do both a. and c.
Suppose individuals expect that interest rates will decrease in the future. Also assume that the Fed wants to prevent any change in current output. Given this goal of the Fed, the Fed should implement a policy in the current period that
A) shifts the IS curve rightward. B) shifts the IS curve leftward. C) shifts the IS curve leftward and the LM curve upward. D) shifts the LM curve upward. E) shifts the LM curve downward.