One source of inefficiency associated with monopolies stems from their insulation from competition and thus reduced incentive to cut costs and innovate.

Imagine that in 2015 the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. Refer to Stock Market Boom 2015. Which curve shifts and in which direction?

a. aggregate demand shifts right b. aggregate supply shifts left. c. aggregate supply shifts right d. aggregate demand shifts left

If a country chooses to have a monetary policy oriented toward domestic goals and a fixed exchange rate, then

A) it can have the freedom of international capital movements. B) it cannot have the freedom of international capital movements. C) it cannot balance its current account. D) it cannot have fiscal policy oriented toward domestic goals. E) it cannot control money supply growth.