A problem with the use of aggregate demand management to stabilize the business cycle is that
A. fiscal policy takes a long time to have any impact on the economy.
B. monetary policy isn't available to use when interest rates are already rising because of higher inflation.
C. the precise amount that output will change in response to monetary or fiscal policy isn't known.
D. monetary policy is difficult to use, because the decision-making process is long and complicated.
Answer: C
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Suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. Answer the following question on the basis of this information. Refer to the information. The level of productivity is:
A. 20. B. 10. C. 5. D. 2.
Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?
A) A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up being 7 percent per year. B) A worker receives a raise in salary that is less than the rate of inflation, because management under-predicted inflation. C) Firms have to hire an extra worker to change prices in its store because of inflation. D) A bank collects a lower amount of interest from a loan because inflation was under-predicted.