The economy is in long-run equilibrium when government unexpectedly increases aggregate demand. The expected inflation rate is slow to adjust to the higher (actual) inflation rate. If follows that in the short run, according to the Friedman natural rate theory, __________ rises and the __________ falls
A) the unemployment rate, price level
B) Real GDP rises, unemployment rate
C) nominal interest rate, real interest rate
D) the unemployment rate, Real GDP level
E) none of the above
B
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The figure above illustrates a linear demand curve. By comparing the price elasticity in the $2 to $4 price range with the elasticity in the $8 to $10 range, you can conclude that the elasticity is
A) greater in the $8 to $10 range. B) greater in the $2 to $4 range. C) the same in both price ranges. D) greater in the $8 to $10 range when the price rises but greater in the $2 to $4 range when the price falls.
In Thailand in the late 1990s, there was pressure for the value of the baht to decline as foreign investors began to
A) increase their investments in Thailand and exchanged their dollars for baht. B) increase their investments in Thailand and exchanged their baht for dollars. C) sell off investments they had made in Thailand and traded in their baht for dollars. D) sell off investments they had made in Thailand and traded in their dollars for baht.