On the graphs above, show how the central bank implements a decrease in the inflation target. In words, explain why the change in the real interest rate is temporary
What will be an ideal response?
The graphs resemble Fig. 13.10 with all shifts reversed. The increase in the real interest rate causes a decrease in expenditures (AD shifts down). Declining inflation lowers the real interest rate (movement along the MP curve), which increases expenditures (movement along the AD curve). Since there has been no shift of the IS curve, the real interest rate must return to its original value, so that aggregate demand is equal to potential output.
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Resources that are ________ tend to be carefully managed to provide profits, which ensures that they will last a long time
A) publicly held B) privately owned C) scarce D) abundant
According to opportunity-cost theory, people will find themselves increasingly "short of time" when
A) their demand curves become less elastic. B) their demand curves become more elastic. C) their income declines. D) they become wealthier. E) they lose valuable opportunities.