Which of the following best explains the negative slope of the short-run Phillips curve?
A) Short-run aggregate supply increases at the same pace as aggregate demand increases so that inflation and unemployment do not change.
B) Weak growth in aggregate demand keeps the economy below potential GDP, so unemployment rises but inflation falls.
C) Aggregate demand grows so quickly that the inflation rate rises as unemployment rises.
D) Long-run aggregate supply increases quickly enough that inflation falls as unemployment also falls.
B
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Which of the following instruments are traded in a money market?
A) bank commercial loans B) commercial paper C) state and local government bonds D) residential mortgages
The slope of the IS curve is influenced by the
A) speculative demand for money. B) transactions demand for money. C) velocity of money. D) marginal propensity to consume.
Monetary policy has no effect on the equilibrium interest rate if
A) the inflation rate is zero. B) the economy is in the liquidity trap. C) velocity is constant. D) the economy is at full employment.
Which economist created the theory of creative destruction?
a. William Nordhaus b. Joseph Schumpeter c. Adam Smith d. Milton Friedman