Monetary policy is limited in that:
A. it can only affect inflation in the long run.
B. it can only affect real growth in the short run.
C. it can only affect real growth in the long run.
D. it can only affect inflation in the short run.
Ans: B. it can only affect real growth in the short run.
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Two countries with differing comparative advantages may engage in trade because
A. They will be able to consume more goods in total due to specialization and trade. B. They will be able to produce and consume goods on their production possibilities curves. C. They will achieve an absolute advantage with one another. D. They are required to because they are part of the World Trade Organization.
The concept of price elasticity of demand measures:
A. the slope of the demand curve. B. the number of buyers in a market. C. the extent to which the demand curve shifts as the result of a price decline. D. the sensitivity of consumer purchases to price changes.
Which of the following statements best describes the concept of consumer surplus?
A) "I paid $89 for a microwave oven last week. This week the same store is selling the same microwave oven for $69." B) "I sold my hard copy of Harry Potter and the Half-Blood Prince to a used book store for $10 even though I was willing to sell it for $5." C) "Target was having a sale on tube socks so I bought 5 pairs." D) "I was going to pay $200 for new sunglasses that I had seen at the Oakley store but I ended up paying only $140 for the same sunglasses."
Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower