Use the graph to answer the following question:
Suppose the economy is in equilibrium at point B which is below the full-employment output of point D. If the government implements fiscal policy targeted at moving real GDP back to point D, but crowding out significantly reduces the effectiveness of the fiscal policy, the equilibrium point will likely end up closer to point
A. A.
B. B.
C. C.
D. D.
Answer: C
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If the Fed decided to target price levels and inflation was lower than its target for a period of time, the Fed would be required to
A) permanently raise inflation above its target to reach and maintain its price level target. B) permanently lower its price level target to align it with the inflation rate. C) temporarily lower its inflation target to match its price level target. D) temporarily raise inflation above its target to reach its price level target.
Mergers between companies producing widely divergent goods is called a
A) conglomerate merger. B) diagonal merger. C) horizontal merger. D) vertical merger.
Refer to the above diagram. At output level Q total cost is:
A. 0AFQ plus BCDE. B. 0BEQ plus BCDE. C. BCDE. D. 0BEQ.
Orchards provide services to beekeepers because the bees use the pollen to make honey. This is an example of
A) a positive externality, and too many orchards exist in society. B) a positive externality, and too few orchards exist in society. C) a negative externality, and too many orchards exist in society. D) a negative externality, and too few orchards exist in society.