Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate demand shifts right, the central bank must
a. decrease the money supply, which shifts aggregate demand further right.
b. decrease the money supply, which shifts aggregate demand left.
c. increase the money supply, which shifts aggregate demand further right.
d. increase the money supply, which shifts aggregate demand left.
b
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What will be an ideal response?
A difference between economic regulation and social regulation is that
A) the former tends to affect the prices at which products are sold and the latter does not. B) the former tends to affect the profits of firms and the latter does not. C) the former tends to be specific to an industry and the latter tends to affect firms in all industries. D) the former tends to be done at the state level and the latter at the federal level.
A decrease in price of a certain good most likely will lead to
a. an increase in quantity demanded and an increase in demand. b. an increase in quantity demanded but no change in demand. c. an increase in demand but no change in quantity demanded. d. no change in demand and no change in quantity demanded.
An approach that can be taken by someone directly involved in a transaction to solve the problems caused by information asymmetry is:
A. statistical discrimination. B. proofing. C. mandating that information be shared. D. All of these are ways to solve information asymmetry.