Use a graph to show the effects of a contractionary monetary policy to reduce inflation and move an economy back to potential real GDP. Explain what happens to aggregate demand, real GDP, and the price level
What will be an ideal response?
If the economy is experiencing inflation, it is currently at point A, beyond potential real GDP. A contractionary monetary policy will shift the aggregate demand curve to the left from AD1 to AD2, decreasing real GDP and the price level until it reaches potential real GDP at point B.
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Regardless of how price inelastic the supply curve, tax revenue from a per-unit tax rises the more price inelastic the demand curve is.
Answer the following statement true (T) or false (F)
In a finitely repeated prisoners' dilemma game
A) firms will only cooperate if they each adopt a tit-for-tat strategy. B) firms cooperate and achieve the collusive Nash equilibrium for all rounds. C) firms cooperate for most of the rounds, but switch to the non-cooperative outcome in the final couple of rounds. D) firms do not cooperate and the static game Nash equilibrium is the outcome for each round.
Because the demand for a perfectly competitive firm's product is perfectly elastic, marginal revenue is equal to
A) one. B) zero. C) the price of the product. D) negative one.
The United States appears at times to have a totally schizophrenic attitude toward protectionism
The United States was the country that proposed the establishment of the World Trade Organization as early as the late 1940s, and was also the only industrialized country that refused to ratify this at that time. The United States has consistently argued on the side of multinational free trade in GATT Rounds, and yet maintains many protectionist laws such as those which reserve oil shipments from Alaska to U.S. flag carriers. How can you explain this apparent lack of national consistency on this issue?