Refer to Exhibit 2-1. If the economy is at point C, it follows that

What does elasticity of demand measure?

a. how responsive consumers are to advertising b. how responsive consumers are to price changes c. how much consumers are affected by layoffs d. how much consumers are affected by inflation

What can the Federal Reserve do to reduce the natural rate of unemployment?

A) nothing B) follow expansionary monetary policy that will reduce inflation C) follow expansionary monetary policy that will increase inflation D) follow contractionary monetary policy that will increase inflation