Why can monetary policymakers neutralize demand shocks but not supply shocks?
What will be an ideal response?
Monetary policy is enacted through shifts in the dynamic aggregate demand curve. Therefore, if aggregate demand were to increase, monetary policymakers can offset that by raising the real interest rate (shifting the monetary policy reaction curve) and thus bring about an opposite effect on the dynamic aggregate demand curve. However, central bankers cannot shift the short-run aggregate supply curve.
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Government intervention can increase total welfare when
A) there are costs or benefits that are external to the market. B) consumers do not have perfect information about product quality. C) a high price makes the product unaffordable for most consumers. D) all of the above E) A and B only
Profit-maximizing employment is the quantity of labor at which
A) marginal revenue product is equal to marginal factor cost. B) marginal revenue product is equal to product price. C) marginal factor cost is equal to marginal revenue. D) marginal factor product is equal to product price.
As a country's human capital increases, we observe that
A. Worker productivity increases. B. Sector service jobs decreases. C. Labor-intensive production processes increases. D. None of the choices are correct.
Which of the following is the most liquid?
A. checkable and debitable account B. certificate of deposit C. cash D. stocks and bonds