If the economy is at point 1 in Figure 13.1 and the central bank issues a credible statement that it can and will cause inflation to rise, what happens next?
A) the economy moves to point 2
B) the economy remains at point 1
C) the economy moves to the left along the AS curve
D) the AS curve shifts down, causing both output and inflation to decline
E) the AS curve shifts up, causing both output and inflation to rise
E
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Which of the following is the definition of the government budget deficit??
A. The total of all past and future tax collections. B. An excess of government spending over revenues during a given period of time C. The total value of all outstanding government securities. D. An excess of government revenues overspending during a given period of time.
Neo-mercantilism refers to an economic policy in which:
A) a country trades in manufactured goods with countries having similar per capita incomes. B) a country focuses on producing a good more efficiently than another nation. C) countries produce and export goods that required resources that were in great supply. D) countries promote a combination of protectionist policies and restrictions and domestic-industry subsidies. E) countries import goods that required resources that were in short supply.
Suppose the nominal interest rate on a savings bond is 7 percent a year and the inflation rate is 4.5 percent a year. How much is the real interest rate?
A) 4.5 percent B) 1.56 percent C) 2.5 percent D) 7 percent E) 11.5 percent
Explain the capture hypothesis
What will be an ideal response?