By the time Paul Volcker took office as the new Federal Reserve chairman in 1979, both the inflation and unemployment rates were higher than during most of the 1950s, 60s and early 70s
The Federal Reserve implemented an autonomous tightening of monetary policy that resulted in the famous Volker Disinflation which was successful in bringing both problems under control. What would have been a likely result had Mr. Volker conducted an expansionary monetary policy instead? A) Inflation would have been made worse right away but unemployment would have been permanently lowered.
B) In the long run the unemployment problem would not have been fixed and the inflation problem would have been made much worse.
C) In the short-run both inflation and unemployment would have declined but in the long-run unemployment would have been worse than before the Fed's action.
D) In the short-run both inflation and unemployment would have been made worse but both would have been lowered in the long-run.
E) none of the above
B
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The figure above shows the market for private elementary school education in Chicago. There is no external cost of private elementary education. If the government does not intervene in this market, the deadweight loss equals
A) 0. B) $800,000. C) $1,600,000. D) more than $1,600,000. E) more than $800,000 and less than $1,600,000.
Compared to high-income developed countries, the per person income levels of poorer less developed countries are somewhat understated because
What will be an ideal response?
Figure 10-8
In the long run, the perfectly competitive firm in Figure 10-8 will leave the industry if the price falls below
a.
$10.
b.
$9.
c.
$5.
d.
$2.
The demand for microwaves in a certain country is given by: D = 8,000 - 30P, where P is the price of a microwave. Supply by domestic microwave producers is: S = 4,000 + 10P. If this economy opens to trade while the world price of a microwave is $50, and the government imposes a tariff of $30 per microwave, then the tariff revenue collected by the government will be ________.
A. $4,000 B. $60,000 C. $24,000 D. $40,000