According to the "self-correcting mechanism" in the AD-AS framework, ________
A) the aggregate demand curve shifts up or down as needed to bring the economy to full employment
B) the inflation rate changes as needed to move the economy along the short-run aggregate supply curve until output is at potential output
C) the long-run aggregate supply curve shifts until it intersects both the aggregate demand and short-run aggregate supply curves at a single point
D) inflation and expected inflation are unaffected by deviations of output from potential output
E) none of the above
E
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Suppose the world price of a shirt is $10. If the United States imposes a tariff of $5 a shirt, then the price of a shirt in the
A) world rises to $5. B) United States rises to $15. C) United States falls to $5. D) world rises to $15 E) world falls to $5.
Which of the following would you expect to lead to improved environmental quality?
A. An export or production subsidy from the French government to French wheat producers B. An export subsidy for producers of clean technology for producing paper C. Freer trade that promotes production of manufactured goods in developing countries where environmental laws are lax D. A voluntary export restraint on the part of Japanese auto producers