Refer to the diagram for a specific economy. The shape of this curve suggests that:
A. the price level rises at a diminishing rate as the level of aggregate demand increases.
B. full employment and price stability are compatible goals only when aggregate demand is
falling.
C. each successive unit of decline in the unemployment rate is accompanied by a smaller
increase in the rate of inflation.
D. each successive unit of decline in the unemployment rate is accompanied by a larger increase in the rate of inflation.
D. each successive unit of decline in the unemployment rate is accompanied by a larger increase in the rate of inflation.
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In the United States, the Federal Reserve pursues an inflation targeting policy of keeping inflation below 2 percent
Indicate whether the statement is true or false
If the velocity of money is completely insensitive to changes in the rate of interest, the
A) LM curve will be horizontal. B) LM curve will be vertical. C) IS curve will be horizontal. D) IS curve will be vertical.
Which of the following groups has an interest in encouraging free trade?
A. Neither workers nor producers in any industry are in favor of trade. B. Workers in import-competing industries. C. Producers in import-competing industries. D. Workers in export industries.
According to the rational choice model developed in this chapter, which statement below is false?
A. Cash grants are always better than in-kind gifts. B. Individual preference patterns do not change because prices change. C. Consumers behave as if they did cost-benefit analysis on every purchase. D. People would be less happy if they exchanged money rather than things at Christmas.