What is opportunistic disinflation and what provides the opportunity? Explain how the process works.
What will be an ideal response?
Opportunistic disinflation means that central bankers can exploit the opportunity created by a positive supply shock to achieve a lower inflation rate. A positive supply shock shifts the short-run aggregate supply curve to the right, resulting in higher output and lower inflation. Central bankers then shift the monetary policy reaction curve to the left (raising the real interest rate), which then shifts the dynamic aggregate demand curve to the left as well. This drives output below potential output, which puts downward pressure on inflation. As a result, inflation falls to the new lower target level. A positive supply shock creates an opportunity for policymakers to guide the economy to a new lower inflation target without inducing a recession.
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The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO
All of the following are reasons for these anti-globalization protests except A) protesters believe that free trade destroys the distinctive cultures of many countries. B) protestors believe the WTO favors the interests of high-income countries at the expense of lower-income countries. C) protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment. D) protesters believe that tariffs are needed to protect domestic firms from foreign competition.
Imposing a unit excise tax on the final sale of a good or service can be displayed graphically as
A) a vertical shift upward of the demand curve. B) a vertical shift upward of the supply curve. C) a vertical shift downward of the demand curve. D) a vertical shift downward of the supply curve.
If nominal GDP is $5 trillion and velocity is 20, then
A) actual money balances held by the nonbanking public are $250 billion. B) actual money balances held by the nonbanking public are $100 trillion. C) real GDP equals $100 trillion. D) real GDP equals $400 trillion.
Draw a long-run average cost curve that first exhibits increasing returns to scale (economies of scale), then constant returns to scale, and finally decreasing returns to scale (diseconomies of scale). Label each region.
What will be an ideal response?