The widespread, but not universal, consensus among economists would be to respond to
A) an adverse supply shock with an accommodating policy.
B) an adverse supply shock with an extinguishing policy.
C) an adverse demand shock with a policy to offset the shock.
D) all of the above.
C
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The demand for a good is more price elastic
A) if closer substitutes are available. B) if the good is a necessity rather than a luxury. C) if the share of the good in the average consumer's budget is smaller. D) in the short run than in the long run.
If government spending and the price level increase, then
A) the interest rate decreases, consumption increases, and investment spending increases. B) the interest rate decreases, consumption declines, and investment spending declines. C) the interest rate increases, consumption declines, and investment spending declines. D) the interest rate increases, consumption increases, and investment spending increases.