When monetary and fiscal policymakers expand aggregate demand, which of the following costs is incurred in the short run?
a. Short-run aggregate supply decreases.
b. The natural rate of unemployment increases.
c. The price level increases more rapidly.
d. The money supply increases less rapidly.
c
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The real interest rate is equal to the
A) nominal interest rate plus the inflation rate. B) nominal interest rate minus the inflation rate. C) nominal interest rate times the inflation rate. D) nominal interest rate divided by the inflation rate. E) inflation rate minus the nominal interest rate.
In a market system, how are the price signals established?
A) Consumer advocacy groups establish fair prices for items, and most firms follow these pricing guidelines because they don't want to anger their consumers. B) Industry associations establish an acceptable price range for each commodity sold within the industry, and member firms are obligated to abide by association guidelines. C) The forces underlying supply and demand interact to determine a market clearing price. D) Federal legislation establishes maximum prices for most goods, and state governments regulate the prices of any remaining items.