Assume the aggregate supply curve is horizontal and the economy is experiencing a recession. Which of the following is most likely to occur if the Fed pursues expansionary monetary policy?
A. The equilibrium price level and output will both decrease.
B. The equilibrium price level will increase but output will stay the same.
C. The equilibrium output will increase but the price level will stay the same until full employment is reached.
D. The equilibrium price level and output will both increase.
Answer: C
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Charging a polluter a fee for each unit of pollution released is an example of
a. the market approach to environmental policy b. the polluter-pays principle c. the command-and-control approach to environmental policy d. (a) and (b) only
If your bank pays you 6% interest on a savings account and inflation is 2%, your approximate real rate of interest is
A) 2%. B) 4%. C) 8%. D) 12%.
What is known as the Dutch disease?
a. The problem that arises when a government cannot meet its foreign debts b. The phenomenon of a boom in one industry causing declines in the rest of the economy c. A sudden and unexpected devaluation of a currency as a consequence of policy controls d. The problem that arises when high imports force an economy to borrow from external sources e. A deficit in the balance of payments of the economy that arises due to a sudden appreciation of the domestic currency.
If the real GDP in 2003 is $12,400 billion and the implicit price deflator is 1.4, what is the value of nominal GDP in 2003?
A. approximately $886 billion. B. approximately $8,857 billion. C. approximately $15,427 billion. D. $17,360 billion.