Is the Taylor rule of greater use to activist or to nonactivist policy makers?
What will be an ideal response?
Nonactivist. The Taylor rule is an alternative to discretionary policy that relies on debatable projections to justify arguably ad hoc interventions. The rule is too crude to eliminate discretion entirely, but serves as a restraint on activist tendencies.
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The long-run supply curve is upward sloping in a(n)
a. decreasing-cost industry b. increasing-cost industry c. constant-cost industry d. labor-intensive industry e. capital-intensive industry
Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C