If policymakers accommodate an adverse supply shock, then in the short run the unemployment rate
a. and the inflation rate rise.
b. and the inflation rate fall.
c. rises and the inflation rate falls.
d. falls and the inflation rate rises.
d
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When the economy is in a liquidity trap, which of the following is not correct?
A) A reduction in the interest rate can be used to increase output. B) Fiscal policy is more important. C) Interest rate is zero. D) Large increases in spending and cuts in taxes were not enough to avoid the recession.
When the overall price level decreases, what is the effect on the economy?
a. Purchasers demand a higher quantity of final goods and services.
b. There is a decrease in the quantity of real GDP demanded.
c. Movement occurs along the curve from point A to point B.
d. The aggregate demand curve shifts rightward.