Refer to Figure 15-11. In the dynamic model of AD-AS in the figure above, the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues policy. This will result in
A) unemployment rates higher than what would occur if no policy had been pursued.
B) real GDP lower than what would occur if no policy had been pursued.
C) short-term interest rates higher than what would occur if no policy had been pursued.
D) inflation higher than what would occur if no policy had been pursued.
D
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Which of the following shocks could trigger an expansion?
a. A large cut-back in military spending. b. A large increase in the price of oil. c. A sudden decrease in consumption. d. A large military buildup. e. A sudden decrease in investment.
Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. Initially buyers believe that 50% of used cameras in the market are lemons (low quality). Compared to the outcome with neutral expectations, how many fewer cameras are sold in equilibrium?
A. 10 B. 15 C. 20 D. 25