To neutralize demand shocks, monetary policymakers shift the monetary policy reaction curve and thus effect changes in real interest rates to create offsetting changes in aggregate demand. However, in practice it is extremely difficult to keep inflation and output from fluctuating when aggregate expenditure changes. There are two reasons for this. First, it takes time to recognize what has happened. For example, changes in consumer or business confidence can be difficult to recognize as they are occurring. Second, the changes in interest rates that policymakers cause do not have an immediate effect on the economy. Thus, in theory, central bankers can neutralize aggregate demand shocks but in reality those shocks cause fluctuations in output and inflation.
a. True
b. False
Answer: a. True
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A. The completion of the national railroad network by 1890 led to the development of a national American market rather than just a series of smaller regional markets. B. Before the Civil War the North and the South were in agreement on the issue of protective tariffs, but were in conflict over the spread of slavery into the new Western territories. C. The U.S. was the first mass-consumption society. D. From 1900 to the end of World War I, U.S. farmers prospered.
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A) is the amount paid for the unit plus the consumer surplus of the unit. B) increases as market price increases. C) is the difference between the amount paid for the unit and the market price of the unit. D) is the difference between the total benefit of the unit and the marginal cost of producing that unit. E) None of the above answers is correct.
When the market value of the dollar rises relative to other currencies around the world, we say that
A) the supply of dollars has increased. B) the dollar has appreciated. C) the dollar has depreciated. D) the demand for dollars has increased.
A good that is perfectly standardized is:
A. likely to be interchangeable with others in the market. B. indistinguishable to others in the market. C. fairly close to others in the market. D. determined to be the same by government.