Suppose that there is a positive aggregate demand shock and the central bank commits to an inflation rate target. If the commitment is credible, then
A) the public's expected inflation will remain unchanged.
B) the short-run aggregate supply curve will not shift.
C) over time inflation will fall back down to the inflation target.
D) all of the above.
E) both A and B.
D
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To find the opportunity cost of producing one more unit of any product while on the production possibilities frontier requires
A) subtracting the change in the product whose production increased from the change in the product whose production decreased. B) dividing the amount of the product forgone by the amount of the product gained. C) setting the amounts of the two products equal to each other. D) setting the change in one product equal to the change in the other product. E) None of these describes how to find opportunity cost.
An expansionary monetary policy in the United States should
A) cause the dollar to appreciate. B) decrease the foreign currency price of U.S. exports. C) decrease net exports. D) decrease the dollar price of imports.