Suppose that the economy has witnessed an 8 percent increase in its money supply over the last few years and the Fed now announces a plan to increase the money supply by 4 percent per year. What will be the public response, assuming that the Fed has a reputation for always implementing its announced plans?
a. High-wage contracts will prevail, and the economy will experience lower inflation at the cost of higher unemployment.
b. High-wage contracts will prevail, and the economy will experience lower unemployment at the cost of higher inflation.
c. Low-wage contracts will emerge, and the economy will experience lower inflation with no change in the unemployment rate.
d. Low-wage contracts will emerge and the economy will experience higher unemployment with no change in the inflation rate.
e. Low-wage contracts will emerge, and the economy will experience lower inflation at the cost of higher unemployment.
c
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Compared to consumption, investment is a much ________ component of GDP and is much more ________
A) smaller; volatile B) larger; volatile C) larger; stable D) smaller; stable
Government-imposed quantity restrictions
A) generate a higher price for the good than would prevail under freely competitive markets. B) generate a lower price for the good than would prevail under freely competitive markets. C) does not affect the price of the good because quantity restrictions always ban sale of the good completely. D) can cause prices to either be higher or lower, but always cause excess quantities supplied to develop.
In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases
a. True b. False Indicate whether the statement is true or false
If the economy were producing at point F,
A. it would not be using its resources efficiently.
B. it would be in a recession.
C. it could gain units of guns without having to sacrifice units of butter.
D. it would specializing exclusively in butter production.