If there is a sudden increase in government spending, which of the following should the Fed do if it wants to keep output unchanged?
a. Do nothing, since the self-correcting mechanism will adjust the economy
b. Sell bonds in the open market
c. Wait, since output usually does not change when government spending increases
d. Decrease the required reserve ratio
e. Buy bonds in the open market
B
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The reason the short-run macro model suggests that the economy can operate either above or below its potential while in the long-run classical model the economy operates automatically at full employment is that
a. the short-run macro model is flawed and inaccurate b. the classical model is flawed and inaccurate c. the two models measure completely different aspects of the economy d. in the short run, spending affects output, but not in the long run e. in the short run the role of government in helping the economy return to equilibrium is not considered
OPEC provides an example of:
A. an unwritten, informal understanding. B. noncollusive oligopoly. C. an international cartel. D. a monopolistically competitive industry.