Deflation generally occurs when which of the following occurs?
A) the consumer price index is greater than the GDP deflator
B) the consumer price index decreases
C) the rate of inflation falls, for example, from 4% to 2%
D) nominal GDP does not change
B
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One advantage of a fixed exchange rate system compared to a floating or managed float exchange rate system is
A) it is easier for central banks to control inflation. B) there is no need for government intervention. C) it allows the exchange rate to reflect demand and supply in the market. D) it eliminates the possibility of depreciation during a recession.
There is concern among economists who favor free trade that some regional agreements may promise free trade, but actually act as a way for the countries within the regional agreement to try to ________ trade from anywhere else.
a. support b. encourage c. eliminate d. limit
Which of the following is true of monopolistic competition but is not true of perfect competition?
a. Each firm distinguishes its product from that of its competitors. b. The firm engages in marginal cost pricing. c. The firm produces at the point where average total cost is minimized. d. There are significant barriers to the entry of new firms in the industry.
Refer to the above diagram. If aggregate supply shifts from AS1 to AS3, then real domestic output will:
A. increase and the price level will increase. B. decrease and the price level will decrease. C. increase and the price level will decrease. D. decrease and the price level will increase.