Refer to Figure 12.3. Suppose that after a negative supply shock, the economy is at point X in the IS-MP model and at point B on the Phillips curve. If the Fed has a goal of price stability, the economy would ________ in the IS-MP model and ________ on the Phillips curve.
A) move to point Y; move to point C
B) remain at X; move to point A
C) move to point Y; remain at point B
D) move to point Z; move to point A
A
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According to the liquidity preference theory, an increase in the overall price level of 10 percent
a. increases the equilibrium interest rate, which in turn decreases the quantity of goods and services demanded. b. decreases the equilibrium interest rate, which in turn increases the quantity of goods and services demanded. c. increases the quantity of money supplied by 10 percent, leaving the interest rate and the quantity of goods and services demanded unchanged. d. decreases the quantity of money demanded by 10 percent, leaving the interest rate and the quantity of goods and services demanded unchanged.
How would you describe an economy that uses its resources to make the greatest possible number of goods and services?
a) efficient b) using opportunity costs well c) globally aware d) underutilized
The concept of equity would explain the redistribution from the rich to the poor which is achieved from a tax system that requires taxes to
A. fall when income rises. B. remain stable when income rises. C. rise when income rises. D. be unrelated to income.
Major categories of market-based instruments include
a. pollution charges d. pollution permit trading systems b. subsidies e. all of the above c. deposit/refund systems