Describe some of the steps used to combat inflation. What are their side-effects?
Inflation is frequently caused by aggregate demand racing ahead too fast. Government policies that reduce demand can keep prices down and thereby reduce inflation. Some examples are reducing government spending or raising taxes, as done by the Clinton administration in the 1990s, or raising interest rates, which the Federal Reserve did in 2005-2006 . Thus, fiscal or monetary policies that reduce aggregate demand can be effective anti-inflationary devices. But such policies also decrease real GDP and raise unemployment.
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Which of the following is an example of the endowment effect?
A) A consumer places a higher value on a good currently owned as compared to a good they are considering purchasing. B) A consumer uses a portion of income in order to provide income to future generations. C) As a consumer's income increases, they increase consumption of most goods. D) Consumers will tend to value objects the same for buying and selling.
The marginal propensity to consume (MPC) is the slope of the:
a. GDP curve. b. disposable income curve. c. consumption function. d. autonomous consumption curve.
Many economists believe that suppliers of loanable funds have property rights to those funds, similar to the way that a person of with extraordinary intelligence or physical abilities has property rights to their intellectual or physical attributes
Indicate whether the statement is true or false
The text compares the macroeconomic performance of Great Britain and France immediately following Great Britain's departure from the ERM in 1992. What does it conclude?
A) The rate of growth of real GDP was higher in France than in Great Britain. B) The rate of growth of real GDP was lower in France than in Great Britain. C) The rates of growth of real GDP were equal in France and in Great Britain. D) GDP growth of both Great Britain and France increased dramatically after Great Britain withdrew from the ERM.