Explain the importance of the shape of supply curve for undertaking stabilization policies
If the aggregate supply curve is flat, expansionary fiscal or monetary policy that raises the aggregate demand curve can buy large gains in real GDP at low cost in terms of inflation. Conversely, when the supply curve is flat, a restrictive stabilization policy is not a very effective way to bring inflation down. Instead, it serves mainly to reduce real output. If the aggregate supply curve is steep expansionary fiscal or monetary policies will cause a good deal of inflation without boosting real GDP much. Contractionary policy is an effective way to bring down the price level without much sacrifice of output.
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The goals of monetary policy tend to be interrelated. For example, when the Fed pursues the goal of ________, this helps to achieve the goal of ________
A) high employment; price stability B) interest rate stability; financial market stability C) rapid economic growth; low inflation D) interest rate stability; a balanced budget
When a country allows trade and becomes an importer of steel,
a. the losses of the domestic producers of steel exceed the gains of the domestic consumers of steel. b. the losses of the domestic consumers of steel exceed the gains of the domestic producers of steel. c. the gains of the domestic producers of steel exceed the losses of the domestic consumers of steel. d. the gains of the domestic consumers of steel exceed the losses of the domestic producers of steel.