In 1979, the Federal Reserve decided to tighten monetary policy in order to reduce inflation, which had risen to double-digit levels. The AD/AS model framework suggests that the short-run effect of this policy was to reduce:
A. neither inflation nor output.
B. inflation primarily with little change in output.
C. output primarily with little change in inflation.
D. both inflation and output.
Answer: C
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Seth is a competitive body builder. He says he has to have his 12-oz package of protein powder to "feed his muscles" every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?
A) It is perfectly inelastic. B) The price elasticity coefficient is 1. C) It is elastic. D) It is perfectly elastic.
Why would economists disagree over positive analysis?
Which of the following statements gives the correct definition of the real deficit?
A. Real deficit = Nominal deficit + (inflation × total debt) B. Real deficit = Nominal deficit + (total debt/inflation) C. Real deficit = Nominal deficit - (inflation × total debt) D. Real deficit = Nominal deficit - (total debt/inflation)
The seller will bear the entire burden of a tax in all of the following except
A. when the demand is perfectly elastic. B. when the supply is perfectly inelastic. C. when the supply curve is a vertical line. D. when the demand curve is a vertical line.