Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we know that the
a. demand is more inelastic than the supply.
b. supply is more inelastic than the demand.
c. government has required that buyers remit the tax payments.
d. government has required that sellers remit the tax payments.
b
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The increase in world oil prices in 1990 initially
a. caused the AS curve to shift upward as wage rates quickly adjusted b. increased the level of GDP associated with high price levels c. shifted the aggregate expenditure line upward d. caused the AS curve to shift upward due to higher costs per unit of output e. caused the AD curve to shift leftward due to an increasing interest rate
Exhibit 17-5 Short-run and long-run Phillips curve
Suppose the government shown in Exhibit 17-5 uses contractionary monetary policy to reduce inflation from 9 to 6 percent. If people have rational expectations, then:
A. the economy will remain stuck at point E1. B. the natural rate will permanently increase to 8 percent. C. unemployment will rise to 8 percent in the short run. D. unemployment will remain at 6 percent as the inflation rate falls.