When expansionary fiscal and monetary policies are joined with a ________ exchange rate system, the various components of economic policy often interact in ways that lead to a crisis followed by a steep recession
A) fixed
B) floating
C) crawling peg
D) flexible
C
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Once an equilibrium is achieved, it can persist indefinitely because
A) shocks that shift the demand curve or the supply curve cannot occur. B) shocks to the demand curve are always exactly offset by shocks to the supply curve. C) the government never intervenes in markets at equilibrium. D) in the absence of supply/demand shocks no one applies pressure to change the price.
The producers of externalities prefer _____ to _____
a. corrective taxation; regulation b. regulation; subsidization c. competition; subsidization d. regulation; corrective taxation
What will tend to happen to wages if workers and employers foresee inflation?
a. Both parties will seek to reduce nominal wages and therefore keep real wages the same. b. Nominal wages will remain constant but real wages will increase to avoid the effects of inflation. c. Inflation erodes purchasing power of workers, and real wages are unchanged. d. Nominal wages will increase by an amount that keeps real wages constant.
When the government sets a maximum price that can be charged for a good or service, it creates
A) a price support. B) a price floor. C) a white market. D) a price ceiling.