In the dynamic aggregated demand and aggregate supply model, inflation occurs if
A) the AD curve shifts more to the right than the LRAS curve.
B) the SRAS curve shifts more to the right than the AD curve.
C) the AD curve shifts to the left and the SRAS curve shifts to the right.
D) the AD curve shifts to the left and the LRAS curve shifts to the right.
Answer: A) the AD curve shifts more to the right than the LRAS curve.
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A proportional income tax is defined as a tax for which
A) total taxes paid increase with the level of income. B) total taxes paid are independent of the level of income. C) the average tax rate increases with the level of income. D) the average tax rate is the same at all levels of income.
Empirical evidence reveals a(n) __________ relationship between money and stock prices
A) positive and consistent B) negative and consistent C) completely independent D) inconsistent
According to monetary theories, a decrease in the money supply shifts the aggregate:
A. Supply curve to the left. B. Supply curve to the right. C. Demand curve to the left. D. Demand curve to the right.
A country with a fixed exchange rate experiences upward pressure on the exchange rate value of its currency. The central bank chooses to intervene in the market to maintain its fixed exchange rate. How would the central bank go about intervening? If the upward pressure on the currency persists, would it be difficult to maintain the fixed exchange rate? Why or why not? Would your answers differ if the country carried out sterilized intervention? Why or why not? Give an example of a country that attempted to maintain its exchange rate in the face of upward pressure on its currency value. What was the result?
What will be an ideal response?