Which of the following best defines time inconsistency?
A) the increasing inaccuracy of econometric models as the time horizon becomes longer
B) the tendency for the rise in output to be greater in the early years of a president's term, and smaller in the later years
C) the effects of political electoral cycles on the business cycle
D) the tendency for policy makers to deviate from a pre-announced optimal policy once agents in the economy have adjusted their behavior and expectations based on the pre-announced policy
E) the effect of economic uncertainty on short-run stabilization policy
D
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
In the above figure, the aggregate demand curve is AD2, so the short-run equilibrium level of real GDP is
A) $16 trillion. B) $16.5 trillion. C) more than $16 and less than $16.5 trillion. D) None of the above answers is correct.
If V falls faster than M increases: a. nominal GDP increases
b. nominal GDP decreases. c. nominal GDP stays the same. d. there is an indeterminate effect on nominal GDP.
In many cities, the price of summer pops concerts has risen. In Charlotte, North Carolina, and Columbus, Ohio, for example, concerts that were once free now cost $5 . If there are only fixed costs and no variable costs nor marginal costs in an orchestra concert, what is the efficient price? Explain the reason why some people will find the efficient price unfair