When an aggregate demand shock hits the economy ________
A) there is no conflict for the central bank between pursuing price or output stability because of the divine coincidence
B) the same long-run equilibrium real interest rate is reached whether the central bank intervenes or not
C) the long-run level of output is unaffected
D) all of the above
E) none of the above
D
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The figure above shows that as a result of the tariff, the price of a T-shirt in the United States ________, and the quantity of T-shirts bought ________
A) rises by $2; decreases by 15 million per year B) rises by $2; increases by 15 million per year C) falls by $2; increases by 5 million per year D) does not change; decreases by 5 million per year E) does not change; does not change
Refer to Figure 27-1. Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising
If contractionary policy is used to move the economy back to long run equilibrium, this would be depicted as a movement from ________ using the static AD-AS model in the figure above. A) B to A B) A to E C) C to B D) E to A E) D to C