Can the Federal Reserve achieve both low inflation and low levels of unemployment? Explain
What will be an ideal response?
To reduce inflation, the Federal Reserve must reduce the money supply, which results in higher interest rates. When interest rates increase, consumption and firm investment fall, resulting in a decrease in aggregate demand and, as the short-run Phillips curve shows, an increase in the level of unemployment in the short run. This result indicates that the Fed cannot simultaneously reduce inflation and unemployment. However, if people immediately revise their inflation expectations once the Fed announces a change in monetary policy, the announcement on contraction in the money supply will move the economy down its long-run Phillips curve to a lower rate of inflation with no change in the unemployment rate. In that case, it would be possible to reduce inflation with no increase in unemployment.
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Economic theory indicates that the amount consumed of a natural resource depends on
a. the price of the resource. b. consumer income. c. the price of substitute resources. d. all of the above.
Which of the following is not a precondition for price discrimination?
A. The commodity involved must be a durable good. B. The good or service cannot be profitably resold by original buyers. C. The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand. D. The seller must possess some degree of monopoly power.
From 1975 to 2000, the employment rate in the United States had been
A. Remaining unchanged. B. Decreasing each year. C. Increasing each year. D. Both increasing and decreasing with an overall upward trend.
During the period from 1950 to 2000, the Labor Force Participation Rate
A. remained remarkably constant. B. increased due largely to teens entering the labor force. C. fell. D. increased due largely to women entering the labor force.