If the Fed announced a policy to reduce inflation and people found it credible, the short-run Phillips curve would shift
a. right and the sacrifice ratio would fall.
b. right and the sacrifice ratio would rise.
c. left and the sacrifice ratio would fall.
d. left and the sacrifice ratio would rise.
c
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Changes in the expected rate of inflation will:
A. cause the SRAS curve to become vertical. B. not shift but create a movement along the SRAS curve. C. shift the SRAS curve downward or upward. D. cause the SRAS curve to become upward-sloping.
Consumption has fallen substantially in Techland due to pessimism among households. What will be the outcome if a contractionary monetary policy is adopted during this period?
What will be an ideal response?
This year a firm produces $100 million worth of cars this year and sells $102 million worth of cars. Which of the following is true?
A) GDP for this year will increase by $100 million. B) GDP for this year will increase by $102 million. C) Inventory investment will increase by $2 million. D) GDP for this year will increase by $202 million. E) The premise of the question is wrong because it is impossible for a firm to sell more than it produces in a given time period.
Based on what we know about asset price formation, what steps can a government use to restrict the formation of an asset price bubble?
A) Lower interest rates in order to discourage savings and investment B) Loosen lending requirements for banks, which encourages investors to buy bank stock rather than the "bubbling" asset C) Increase the money supply D) Raise interest rates in order to increase the costs of financing asset purchases