According to the text, the government can use aggregate demand management policies to reduce unemployment rates. A byproduct of this policy will be
A. an increase in the price level.
B. a decrease in real GDP.
C. a decrease in the price level.
D. an increase in the budget surplus.
Answer: A
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Suppose that when the price of oranges decreases, Sarita decreases her purchases of peaches. To Sarita,
A) oranges and peaches are normal goods. B) oranges and peaches are substitutes. C) oranges and peaches are complements. D) oranges and peaches are inferior goods.
If the Fed decides to engage in an open market operation to increase the money supply, what will it do?
a. Sell Treasury bonds, bills, or notes on the bond market. b. Buy Treasury bonds, bills, or notes on the bond market. c. Increase the required reserve ratio. d. Increase the fed funds rate.
Give a hypothetical example that shows how commercial banks can counteract the Fed’s monetary policy.
What will be an ideal response?
If expected inflation increases:
A. the short-run Phillips curve remains unchanged. B. the short-run Phillips curve shifts up. C. the short-run Phillips curve shifts down. D. there is a movement along a short-run Phillips curve.