What usually happens after an adverse supply shock?
What will be an ideal response?
Prices rise and output falls.
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If a citizen decides he has had enough of big government and launches a personal campaign to expose big spenders in Congress,
a. he is likely to have his taxes reduced dramatically b. his taxes are not likely to fall very much c. he will be thrown in jail d. he is likely to get elected by other voters e. he will get the support of many special-interest groups
Which of the following would be most likely to cause an appreciation of the dollar relative to foreign currencies?
a. higher domestic interest rates b. a reduction in the rate of inflation abroad c. a shift to a more expansionary monetary policy d. rapid growth of income in the United States
In general, the longest lag for
a. both fiscal and monetary policy is the time it takes to change policy. b. both fiscal and monetary policy is the time it takes for policy to affect aggregate demand. c. monetary policy is the time it takes to change policy, while for fiscal policy the longest lag is the time it takes for policy to affect aggregate demand. d. fiscal policy is the time it takes to change policy, while for monetary policy the longest lag is the time it takes for policy to affect aggregate demand.
Suppose that because of climatic conditions, the smog levels in Los Angeles suddenly soar to dangerous levels. The most successful policy in this case would be
A. direct controls to limit driving. B. taxes on drivers at rush hours. C. voluntary cooperation to reduce driving. D. removal of autos with excessive emissions.