Legal constraints will always reduce the size of the economic pie

The Fed is concerned about inflation. Its policy will ________ U.S. short-term interest rates and, in the foreign exchange market, lead to the value of the U.S. dollar ________

A) lower; rising B) lower; not changing C) raise; rising D) lower; falling E) raise; not changing

Which of the following represents a long-run adjustment?

A. Unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants. B. A supermarket hires four additional clerks. C. A farmer uses an extra dose of fertilizer on his corn crop. D. A steel manufacturer cuts back on its purchases of coke and iron ore.