Suppose the economy is experiencing an inflationary gap. Based on available data, the Fed starts implementing contractionary monetary policy, but this moves the economy into a recessionary gap. The most probable explanation is that, because of the total lag in monetary policy, the government did not realize that the economy was already healing itself, i.e., that the
A) AD curve was shifting rightward.
B) AD curve was shifting leftward.
C) SRAS curve was shifting rightward.
D) SRAS curve was shifting leftward.
D
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Average revenue is slightly higher than price.
Answer the following statement true (T) or false (F)
In the classical view, flexible wage rates would assure
A) low inflation. B) high rates of unemployment. C) high secular inflation rates. D) full employment.
In the above figure, assume the economy starts out in equilibrium at point d. If the Fed increases the money supply so that the new aggregate demand curve is AD3, then the new short-run equilibrium will be at point
A) a. B) b. C) c. D) i.
Suppose that lenders want to receive a real rate of interest of 5%, and that they expect inflation to remain steady at 2% in the coming years. Based on this, lenders should charge a nominal interest rate of
A. 7%. B. 3%. C. 5%. D. 2%.