Neutralizing demand shocks is easier in theory than in practice. Why?
What will be an ideal response?
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.
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Subsistence production is
a. produced on the farm for a city market b. produced for export c. produced for sale to neighboring villages d. produced for consumption by the producer e. none of the above.
For a linear and upward sloping supply curve, when the consumer has to pay a positive price for the good, the variable cost to the consumer is a
A. four-sided figure that is a rectangle on the bottom and a right triangle on the top whose hypotenuse is the demand curve. B. four-sided figure that is a rectangle on the bottom and a right triangle on the top whose hypotenuse is the supply curve. C. rectangle. D. triangle.
Why has the U.S. natural rate of unemployment fallen since the early 1990s?
What will be an ideal response?
Under a flexible exchange rate system, exchange rates are determined by free markets
Indicate whether the statement is true or false