On the graphs above, show how the central bank implements a decrease in the inflation target. In words, explain why the change in the real interest rate is temporary
What will be an ideal response?
The graphs resemble Fig. 13.10 with all shifts reversed. The increase in the real interest rate causes a decrease in expenditures (AD shifts down). Declining inflation lowers the real interest rate (movement along the MP curve), which increases expenditures (movement along the AD curve). Since there has been no shift of the IS curve, the real interest rate must return to its original value, so that aggregate demand is equal to potential output.
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Rent seeking refers to
a. what landlords do b. looking for an apartment c. capturing the economic results of government-created scarcity d. all profit-making activity e. all of the above
For a firm in a perfectly competitive market, a price decrease:
A. lowers the profit-maximizing quantity. B. is unrelated to the profit-maximizing quantity. C. increases the profit-maximizing quantity. D. signifies the firm should leave the market.
A decrease in the price of a product and an increase in the number of buyers in the market affect the demand curve in the same general way
a. True b. False Indicate whether the statement is true or false
The natural level of employment (N) will increase when which of the following occurs?
A) an increase in the markup of prices over costs B) a reduction in unemployment benefits C) an increase in the actual unemployment rate D) all of the above E) none of the above