Question 1

Stagflation is a term that usually describes an economy experiencing:&#10;A) low inflation.&#10;B) low inflation coupled with low growth.&#10;C) high inflation coupled with low growth.&#10;D) low unemployment rates and low inflation rates.

Accepted Answer

Stagflation is a rare phenomenon where an economy experiences a combination of high inflation and low economic growth or even recession. This is a tough situation as it can lead to lower employment rates, higher prices, and reduced consumer confidence. Low inflation (A) and low growth (B) do not fit the definition of stagflation, while D describes a healthy economy rather than one experiencing stagflation.

Question 2

Which of the following would shift the short-run aggregate supply curve to the right?&#10;A) An increase in oil prices&#10;B) A reduction in the minimum wage&#10;C) A change in the law requiring overtime pay for anyone working more than 30 hours a week&#10;D) An increase in payroll taxes

Accepted Answer

A reduction in the minimum wage would decrease the cost of production and increase productivity, leading to a rightward shift in the short-run aggregate supply curve. Options A, C, and D would all increase the cost of production, leading to leftward shifts in the short-run aggregate supply curve.

Question 3

During the Vietnam War, monetary policy officials reacted to the increases in aggregate demand resulting from military expenditures by:&#10;A) not shifting the monetary policy reaction function.&#10;B) dramatically slowing money growth.&#10;C) shifting the monetary policy reaction curve to the left.&#10;D) keeping the same inflation target and raising the real interest rates.

Accepted Answer

During the Vietnam War, monetary policy officials did not significantly alter their monetary policy reaction function in response to increased aggregate demand from military expenditures, leading to inflationary pressures.

Question 4

Negative supply shocks cause shifts in:&#10;A) only the short-run aggregate supply curve.&#10;B) the dynamic aggregate demand curve.&#10;C) the monetary policy reaction curve but only if policymakers do not change their inflation target.&#10;D) the short-run aggregate supply curve and, possibly, the long-run aggregate supply curve.

Accepted Answer

Negative supply shocks, such as an increase in the cost of production or a decrease in the availability of resources, will cause a shift in the short-run aggregate supply (SRAS) curve to the left, as firms face higher costs and are willing to produce less output at any given price level. This will lead to higher prices and lower output in the short run. In some cases, negative supply shocks can also affect the long-run aggregate supply (LRAS) curve, if they have a persistent impact on the economy's ability to produce goods and services. Specifically, if the negative supply shock reduces the potential output of the economy (e.g. if it damages the capital stock or reduces the size of the workforce), then the LRAS curve will shift to the left as well. However, if the shock is temporary and does not affect the economy's underlying productive capacity, then the LRAS curve will remain unchanged. Since negative supply shocks do not affect the demand side of the economy, they do not cause shifts in the dynamic aggregate demand curve or the monetary policy reaction curve.

Question 5

Permanent declines in inflation such as those seen in Chile and Sweden must have been a result of:&#10;A) an increase in the central bank's inflation target.&#10;B) a decrease in the central bank's inflation target.&#10;C) less independence for their central banks.&#10;D) a change to targeting interest rates instead of inflation rates.

Accepted Answer

A decrease in the central bank's inflation target can lead to a permanent decline in inflation as it signals commitment to lower inflation and can anchor inflation expectations. This has been observed in countries like Chile and Sweden, which lowered their inflation targets in the 1990s, leading to sustained low inflation rates. The other options are not supported by empirical evidence.

Question 6

An increase in aggregate demand will have the following effect on potential output:&#10;A) potential output will increase.&#10;B) potential output will decrease.&#10;C) potential output will increase at first and then decrease.&#10;D) there won't be a change in potential output from an increase in aggregate demand.

Accepted Answer

An increase in aggregate demand does not affect potential output, which is determined by the economy's capacity to produce goods and services based on its resources, technology, and institutions. Potential output can only be increased in the long run by improving factors such as productivity, education, and innovation. However, an increase in aggregate demand can cause an increase in actual output in the short run due to the utilization of idle resources and capacity, but it may also lead to inflationary pressures if resources become scarce or inefficiently allocated.

Question 7

If inflation increases, this could be illustrated as a:&#10;A) rightward shift of the long-run aggregate supply curve.&#10;B) leftward shift of the long-run aggregate supply curve.&#10;C) rightward shift of the short-run aggregate supply curve.&#10;D) movement down along the short-run aggregate supply curve.

Accepted Answer

Inflation is defined as an increase in the average level of prices in the economy. This is caused by a decrease in the purchasing power of money. Therefore, an increase in inflation would result in higher costs for inputs, which would decrease the profitability of firms. In response to this, firms would decrease production, leading to a leftward shift of the long-run aggregate supply curve.

Question 8

The period 1974-1975 is somewhat unique in U.S. economic history due to the fact that:&#10;A) the output was growing rapidly and the inflation rate was falling.&#10;B) both the output and the inflation rate were falling.&#10;C) output was falling yet the inflation rate rose dramatically.&#10;D) output and the inflation rate were both rising.

Accepted Answer

During the period of 1974-1975, the U.S. experienced stagflation, a situation where the economy was in recession (output falling) while inflation was rising dramatically. This was a unique economic condition that challenged traditional economic theories.

Question 9

The 2008 and 2009 tax cuts and the increase in government spending that occurred at the same time did not have the same inflationary impact as the similar policy in the 1960s because:&#10;A) the fiscal stimulus came at a time when the economy was weakening due to other factors.&#10;B) monetary policymakers, having perceived the inflation risk, responded appropriately.&#10;C) aggregate demand was far below potential output.&#10;D) all of the answers provided are correct.

Accepted Answer

The 2008 and 2009 tax cuts and increase in government spending occurred during a period of economic weakness, with aggregate demand significantly below potential output. Monetary policymakers were also more aware and responsive to inflation risks, employing measures to mitigate these risks. All these factors contributed to a different inflationary impact compared to similar policies in the 1960s.

Question 10

Which of the following would be classified as a negative supply shock?&#10;A) An increase in the legal minimum wage&#10;B) A decrease in the price of oil&#10;C) An increase in government purchases&#10;D) An increase in demand for exports

Accepted Answer

A negative supply shock is an event that causes a sudden decrease in the supply of goods and services that leads to an increase in their prices. An increase in the legal minimum wage would raise the costs of labor for firms, reducing their profitability and discouraging them from hiring workers or producing as much output as before. As a result, this would lead to a decrease in the aggregate supply, shifting the supply curve to the left and causing prices to rise. This would be classified as a negative supply shock.

B) A decrease in the price of oil would increase the profits of oil-producing firms, lower production costs for oil users, and stimulate economic activity, leading to an increase in the aggregate supply. This would be classified as a positive supply shock.

C) An increase in government purchases would increase the demand for goods and services, stimulating economic activity, but it does not affect the supply side of the economy. Therefore, it is not classified as a supply shock.

D) An increase in demand for exports would increase the demand for domestic goods and services, stimulating production and employment, but it does not affect the supply side of the economy. Therefore, it is not classified as a supply shock.

Question 11

Which of the following statements is incorrect?&#10;A) A fall in the central bank's target inflation rate shifts the monetary policy reaction curve to the left.&#10;B) A decrease in the central bank's inflation target raises the real interest rate policymakers set at each level of inflation.&#10;C) Shifts in the monetary policy reaction curve shift the dynamic aggregate demand curve in the same direction.&#10;D) A fall in the central bank's target inflation rate causes the monetary policy reaction curve to flatten.

Accepted Answer

The answer of Which of the following statements is incorrect?&#10;A)...

Question 12

Which of the following would be classified as a negative supply shock?&#10;A) An increase in the price of oil&#10;B) An increase in government purchases&#10;C) An increase in export demand&#10;D) A decline of investor optimism

Accepted Answer

The answer of Which of the following would be classified...

Question 13

A &#34;shock&#34; is something that creates a shift in:&#10;A) the demand curve only.&#10;B) the supply curve only.&#10;C) either the demand curve or the supply curve.&#10;D) both the demand curve and the supply curve at the same time.

Accepted Answer

The answer of A &#34;shock&#34; is something that creates a...

Question 14

An increase in the price of oil should cause the short-run aggregate supply curve to:&#10;A) shift to the right.&#10;B) become vertical.&#10;C) become horizontal.&#10;D) shift to the left.

Accepted Answer

The answer of An increase in the price of oil...

Question 15

An increase in aggregate demand with no adjustment in monetary policy will result in:&#10;A) an increase in potential output and higher inflation.&#10;B) a decrease in potential output and higher inflation.&#10;C) no change in potential output but higher inflation.&#10;D) no change in inflation.

Accepted Answer

The answer of An increase in aggregate demand with no...

Question 16

A reduction in the central bank's inflation target will result in:&#10;A) an increase in potential output.&#10;B) no change in potential output.&#10;C) a decrease in potential output.&#10;D) the long-run aggregate supply curve having an upward slope.

Accepted Answer

The answer of A reduction in the central bank's inflation...

Question 17

A reduction in the central bank's inflation target shifts the dynamic aggregate demand curve to the left resulting in:&#10;A) lower current output and higher inflation.&#10;B) higher current output and higher inflation.&#10;C) lower current output and lower inflation.&#10;D) higher current output and lower inflation.

Accepted Answer

The answer of A reduction in the central bank's inflation...

Question 18

If monetary policymakers do not want an increase in government purchases, which increases aggregate demand, to cause an increase in inflation, they would:&#10;A) shift the monetary policy reaction curve to the right, raising inflation at every real interest rate.&#10;B) do nothing and let the economy's self-correcting mechanism work.&#10;C) shift the monetary policy reaction function left, increasing the real interest rate at every rate of inflation.&#10;D) increase the growth rate of money.

Accepted Answer

The answer of If monetary policymakers do not want an...

Question 19

If monetary policymakers do not change their inflation target and aggregate demand shifts left:&#10;A) there will be a temporary decrease in output.&#10;B) potential output will decrease.&#10;C) there will be an increase in inflation in the long run.&#10;D) it will result in a permanent reduction in inflation.

Accepted Answer

The answer of If monetary policymakers do not change their...

Question 20

Without a change in target inflation, anything that shifts the aggregate demand curve to the right will cause:&#10;A) a temporary increase in output.&#10;B) a permanent reduction in inflation.&#10;C) a temporary decrease in inflation.&#10;D) an increase in output in the long run.

Accepted Answer

The answer of Without a change in target inflation, anything...

Question 21

According to the NBER, a severe decline in economic activity that lasted less than two quarters:&#10;A) could not be considered a recession.&#10;B) could still be considered a recession.&#10;C) would not be called a recession until more than two years had passed.&#10;D) would immediately be called a recession.

Accepted Answer

The answer of According to the NBER, a severe decline...

Question 22

&#34;Official&#34; recessions in the United States are declared by:&#10;A) the Federal Reserve.&#10;B) the U.S. department of the Treasury.&#10;C) the National Bureau of Economic Research.&#10;D) Congress.

Accepted Answer

The answer of &#34;Official&#34; recessions in the United States are...

Question 23

An increase in the rate of inflation:&#10;A) can only result from increases in aggregate demand.&#10;B) can only result from upward shifts in the short-run aggregate supply curve.&#10;C) will result only if the long-run aggregate supply curve is vertical.&#10;D) can result from shifts in either the dynamic aggregate demand curve or the short-run aggregate supply curve.

Accepted Answer

The answer of An increase in the rate of inflation:&#10;A)...

Question 24

Which of the following statements is most correct?&#10;A) Policymakers can eliminate the effects of negative supply shock.&#10;B) Policymakers can neutralize movements in aggregate demand.&#10;C) Policymakers can shift the short-run aggregate supply curve.&#10;D) Shifts in the monetary policy reaction function used to stabilize the economy shift the short-run aggregate supply curve.

Accepted Answer

The answer of Which of the following statements is most...

Question 25

What tool is available to monetary policymakers to shift the short-run aggregate supply curve to the left following a positive inflation shock?&#10;A) A rightward shift of the monetary policy reaction curve&#10;B) A leftward shift of the monetary policy reaction curve&#10;C) Open market purchases of government securities&#10;D) None of the answers given is correct; the actions of monetary policymakers affect the dynamic aggregate demand curve

Accepted Answer

The answer of What tool is available to monetary policymakers...

Question 26

An inflation shock that shifts the short-run aggregate supply curve leftward and leaves the long-run supply curve unchanged means the economy's potential level of output will:&#10;A) increase.&#10;B) not change.&#10;C) decrease.&#10;D) decrease only if monetary policymakers do not respond.

Accepted Answer

The answer of An inflation shock that shifts the short-run...

Question 27

A review of economic data suggests that:&#10;A) expansions are shorter than recessions.&#10;B) business cycles are recurrent and periodic.&#10;C) over the last fifty years, recessions are becoming more common.&#10;D) recessions are shorter in duration than expansions.

Accepted Answer

The answer of A review of economic data suggests that:&#10;A)...

Question 28

Almost all recessions identified by the NBER are characterized by:&#10;A) declining real GDP.&#10;B) higher interest rates.&#10;C) durations exceeding two years.&#10;D) higher rates of inflation.

Accepted Answer

The answer of Almost all recessions identified by the NBER...

Question 29

Suppose that consumer and business confidence fall. What is the ultimate outcome for the economy if monetary policymakers respond to keep inflation on an unchanged target?&#10;A) If monetary policymakers respond, output would remain close to potential output.&#10;B) If monetary policymakers respond, output would fall below potential output.&#10;C) If monetary policymakers respond, output would rise above potential output.&#10;D) If monetary policymakers respond, output would remain close to potential output but inflation would still rise despite their actions.

Accepted Answer

The answer of Suppose that consumer and business confidence fall....

Question 30

Stabilization policy refers to the use of:&#10;A) only fiscal policy.&#10;B) only monetary policy.&#10;C) either fiscal or monetary policy.&#10;D) policy to shift the long-run aggregate supply curve.

Accepted Answer

The answer of Stabilization policy refers to the use of:&#10;A)...

Question 31

Which of the following statements is most correct?&#10;A) A recession is officially defined as two consecutive quarters where the real growth rate is negative.&#10;B) A recession officially begins when unemployment exceeds 5.0 percent.&#10;C) There is no hard and fast definition of a recession.&#10;D) The official date of a recession is determined by the Federal Reserve Board, but usually with at least a three-month delay.

Accepted Answer

The answer of Which of the following statements is most...

Question 32

Tax cuts would have the same directional effect on the dynamic aggregate demand curve as:&#10;A) decreases in government purchases.&#10;B) the Federal Reserve selling U.S. treasury securities.&#10;C) the Federal Reserve buying U.S. treasury securities.&#10;D) temporary tax increases.

Accepted Answer

The answer of Tax cuts would have the same directional...

Question 33

Business cycles vary in:&#10;A) the length of recessions only.&#10;B) the time between recessions only.&#10;C) both the length of recessions and the time between recessions.&#10;D) none of the answers given is correct; business cycles are by definition recurring waves that rise and fall in a periodic pattern.

Accepted Answer

The answer of Business cycles vary in:&#10;A) the length of...

Question 34

Stagflation occurs when:&#10;A) the inflation rate decreases and current output decreases.&#10;B) the inflation rate increases and current output decreases.&#10;C) the inflation rate decreases and current output increases.&#10;D) the inflation rate increases and current output increases.

Accepted Answer

The answer of Stagflation occurs when:&#10;A) the inflation rate decreases...

Question 35

In practice, it is difficult to keep inflation and output from fluctuating when aggregate expenditures change because:&#10;A) it takes time for policymakers to recognize that shifts have occurred.&#10;B) changes in interest rates do not have an immediate impact on the economy.&#10;C) changes in consumer or business confidence can be very difficult to recognize as they are occurring.&#10;D) all of the answers given are correct.

Accepted Answer

The answer of In practice, it is difficult to keep...

Question 36

Unemployment insurance and the proportional nature of the tax system are examples of:&#10;A) discretionary fiscal policy.&#10;B) automatic fiscal policy.&#10;C) both discretionary and automatic fiscal policy.&#10;D) expansionary fiscal policy.

Accepted Answer

The answer of Unemployment insurance and the proportional nature of...

Question 37

Policymakers can stabilize the economy by shifting:&#10;A) the short-run aggregate supply curve.&#10;B) the dynamic aggregate demand curve.&#10;C) the long-run aggregate supply curve.&#10;D) neither the short-run aggregate supply curve nor the dynamic aggregate supply curve.

Accepted Answer

The answer of Policymakers can stabilize the economy by shifting:&#10;A)...

Question 38

The dynamic aggregate demand curve shifts as a result of:&#10;A) discretionary fiscal policy.&#10;B) automatic fiscal policy.&#10;C) either discretionary or automatic fiscal policy.&#10;D) fiscal policy but only when it's used in conjunction with monetary policy.

Accepted Answer

The answer of The dynamic aggregate demand curve shifts as...

Question 39

The longest recession since the 1940's began in:&#10;A) 1952.&#10;B) 1973.&#10;C) 1981.&#10;D) 2007.

Accepted Answer

The answer of The longest recession since the 1940's began...

Question 40

Which of the following is not correct with regard to the definition of a recession as used by the NBER?&#10;A) A recession occurs whenever there is a dip in the growth rate.&#10;B) The exact length of time needed for a downturn to be declared a recession is not specified.&#10;C) Many key economic indicators are used, some of which may move in opposite directions.&#10;D) A recession is characterized by lower levels of economic activity.

Accepted Answer

The answer of Which of the following is not correct...

Question 41

Consider the period from 1995 to 1999. The U.S. economy:&#10;A) experienced the great productivity slowdown.&#10;B) experienced increases in productivity that allowed the Fed the opportunity to raise the inflation rate.&#10;C) experienced increases in productivity that allowed the Fed the opportunity to let the inflation rate fall.&#10;D) saw its potential level of output decrease.

Accepted Answer

The answer of Consider the period from 1995 to 1999....

Question 42

During the Great Moderation experienced in the United States during the 1990s the volatility of inflation and growth:&#10;A) moved in opposite directions.&#10;B) both dropped significantly.&#10;C) both increased but only slightly.&#10;D) disappeared.

Accepted Answer

The answer of During the Great Moderation experienced in the...

Question 43

Real business cycle theory seeks to explain business cycle fluctuations by focusing on:&#10;A) shifts in potential output.&#10;B) the inflexibility of prices and wages.&#10;C) aggregate demand.&#10;D) changes in monetary policy.

Accepted Answer

The answer of Real business cycle theory seeks to explain...

Question 44

Possible explanations that have been offered for the Great Moderation experienced in the United States include all of the following except:&#10;A) good fortune.&#10;B) economies that have become more flexible in absorbing shocks.&#10;C) calm financial markets.&#10;D) better understanding and use of monetary policy.

Accepted Answer

The answer of Possible explanations that have been offered for...

Question 45

Opportunistic disinflation occurs when policymakers:&#10;A) change the target inflation rate.&#10;B) take advantage of positive supply shocks.&#10;C) are able to permanently lower inflation.&#10;D) all of the answers given are correct.

Accepted Answer

The answer of Opportunistic disinflation occurs when policymakers:&#10;A) change the...

Question 46

The assumption that prices and wages are flexible implies that the:&#10;A) short-run aggregate supply curve is irrelevant.&#10;B) short-run aggregate supply curve shifts slowly in response to deviations of current output from potential output.&#10;C) long-run aggregate supply curve is irrelevant.&#10;D) long-run aggregate supply curve could not shift.

Accepted Answer

The answer of The assumption that prices and wages are...

Question 47

Which of the following statements best describes the level of potential output in the U.S.?&#10;A) It never changes year to year&#10;B) It is very erratic year to year&#10;C) It usually increases year to year&#10;D) It has been decreasing since 1999

Accepted Answer

The answer of Which of the following statements best describes...

Question 48

Increases in potential output shift:&#10;A) the long-run aggregate supply curve.&#10;B) the short-run aggregate supply curve.&#10;C) both the long-run aggregate supply curve and the short-run aggregate supply curve.&#10;D) the long-run aggregate supply curve, the short-run aggregate supply curve, and the dynamic aggregate demand curve.

Accepted Answer

The answer of Increases in potential output shift:&#10;A) the long-run...

Question 49

Comparing monetary and fiscal policy:&#10;A) fiscal policy has an advantage because it is faster to implement than monetary policy.&#10;B) fiscal policy is easier to implement.&#10;C) monetary policy is easier to implement.&#10;D) history has shown fiscal policy to be more effective at stabilization.

Accepted Answer

The answer of Comparing monetary and fiscal policy:&#10;A) fiscal policy...

Question 50

The key part of the real business cycle theory model is:&#10;A) the importance of monetary policy.&#10;B) the short-run aggregate supply curve.&#10;C) changes in aggregate demand.&#10;D) changes in potential output.

Accepted Answer

The answer of The key part of the real business...

Question 51

Higher potential output levels:&#10;A) put upward pressure on real interest rates.&#10;B) put downward pressure on real interest rates and upward pressure on inflation rates.&#10;C) put upward pressure on real interest rates and downward pressure on inflation rates.&#10;D) none of the answers given is correct.

Accepted Answer

The answer of Higher potential output levels:&#10;A) put upward pressure...

Question 52

Fiscal policy suffers from the problem of:&#10;A) being formulated and implemented by politicians subject to short-run incentives.&#10;B) being slow to implement.&#10;C) being influenced by special interest groups.&#10;D) all of the answers given are correct.

Accepted Answer

The answer of Fiscal policy suffers from the problem of:&#10;A)...

Question 53

Disinflation occurs when:&#10;A) the inflation rate is negative.&#10;B) the inflation rate is 2 percent or less.&#10;C) the inflation rate goes above ten percent.&#10;D) the rate of inflation declines.

Accepted Answer

The answer of Disinflation occurs when:&#10;A) the inflation rate is...

Question 54

Monetary policy has the following advantage(s) over fiscal policy:&#10;A) it is less influenced by politics.&#10;B) it can be implemented faster.&#10;C) it can usually be fine-tuned.&#10;D) all of the answers given are correct.

Accepted Answer

The answer of Monetary policy has the following advantage(s) over...

Question 55

Most economists attribute the Great Moderation experienced in the United States during the 1990s mainly to:&#10;A) good fortune.&#10;B) slowing productivity growth.&#10;C) aggressive fiscal policy.&#10;D) better understanding and use of monetary policy.

Accepted Answer

The answer of Most economists attribute the Great Moderation experienced...

Question 56

Increases in productivity result in:&#10;A) higher inflation as output increases.&#10;B) lower inflation as output decreases.&#10;C) opportunities for policymakers to reduce their inflation target without inducing a recession.&#10;D) none of the answers provided is correct.

Accepted Answer

The answer of Increases in productivity result in:&#10;A) higher inflation...

Question 57

Monetary policymakers can respond to the impact that positive inflation shocks have on output by shifting the:&#10;A) monetary policy reaction curve left.&#10;B) monetary policy reaction curve right.&#10;C) short-run aggregate supply curve to the left.&#10;D) short-run aggregate supply curve to the right.

Accepted Answer

The answer of Monetary policymakers can respond to the impact...

Question 58

If a positive inflation shock occurs and monetary policymakers do not change the inflation target:&#10;A) output will eventually return to potential output and inflation will equal the inflation target.&#10;B) output will eventually rise above potential output while inflation will equal the inflation target.&#10;C) output will eventually fall below potential output while inflation will equal the inflation target.&#10;D) output will eventually return to potential output but inflation will exceed the inflation target.

Accepted Answer

The answer of If a positive inflation shock occurs and...

Question 59

Real business cycle theory explains fluctuations in output through:&#10;A) changes in aggregate demand.&#10;B) changes in productivity.&#10;C) shifts of the short-run aggregate supply curve.&#10;D) changes in monetary policy.

Accepted Answer

The answer of Real business cycle theory explains fluctuations in...

Question 60

Since 1950, the U.S. economy has likely experienced:&#10;A) more periods of deflation than disinflation.&#10;B) more periods of disinflation than deflation.&#10;C) an equal number of periods of deflation and disinflation since they are synonymous.&#10;D) none of the answers provided is correct.

Accepted Answer

The answer of Since 1950, the U.S. economy has likely...

Question 61

Central bankers with a relatively steep monetary policy reaction curve will:&#10;A) move interest rates more aggressively when inflation rises, leading to more volatility in output.&#10;B) move interest rates more aggressively when inflation rises, leading to less volatility in output.&#10;C) move interest rates less aggressively when inflation rises, leading to more volatility in output.&#10;D) move interest rates less aggressively when inflation rises, leading to less volatility in output.

Accepted Answer

The answer of Central bankers with a relatively steep monetary...

Question 62

In an economy like the United States, the impact of a decrease in import prices on overall inflation can be best described as:&#10;A) nonexistent.&#10;B) a modest increase.&#10;C) a modest decrease.&#10;D) a significant decrease, particularly as globalization and trade increase.

Accepted Answer

The answer of In an economy like the United States,...

Question 63

Explain why changes in the central bank's inflation target will shift the dynamic aggregate demand curve.

Accepted Answer

The answer of Explain why changes in the central bank's...

Question 64

If the monetary policy reaction curve has a relatively flat slope, the dynamic aggregate demand curve is likely to have a:&#10;A) relatively steep slope.&#10;B) relatively flat slope.&#10;C) positive slope.&#10;D) zero slope.

Accepted Answer

The answer of If the monetary policy reaction curve has...

Deck 22:Understanding Business Cycle Fluctuations