Monopolistic competition is characterized by
A) relative ease of entry into the market.
B) a standard, undifferentiated product.
C) persistent long-run economic profits.
D) a horizontal demand curve faced by all firms.
Answer: A
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Which of the following is likely to have the shortest transmission lag?
A) a change in personal income tax rates B) a change in government expenditures C) an increase in subsidies paid to firms D) an increase in public-service employment
Based on the given figure, the economy is initially at point A on the monetary policy reaction function (RF1) and the aggregate demand curve (AD1). The actual rate of inflation is ?' and the Federal Reserve's target inflation rate is ?*1. 
If the Federal Reserve raises its target inflation rate to ?*3, then the Federal Reserve's monetary policy reaction function will ________ and the aggregate demand curve will ________.
A. shift to RF3; shift to AD2 B. shift to RF2; shift to AD3 C. shift to RF2; shift to AD2 D. shift to RF3; shift to AD3