When the economy suffers a permanent negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy, then
A) inflation will be lower.
B) output will be at its potential.
C) output will be lower.
D) inflation will not change.
E) both A and B.
C
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Two nations have the following production capacity given their endowment of resources. Country A can produce 40 units of beer or 90 units of pizzas. Country B can produce 120 units of beer or 70 units of pizzas. Which of the following statements is most appropriate to decide how these countries should specialize?
A. Country B has an absolute advantage in both products. B. Country A has a comparative advantage in pizza and country B has a comparative advantage in beer. C. Country A has no comparative advantage and country B has a comparative advantage in beer. D. Country A has a comparative advantage in beer and country B has a comparative advantage in pizzas.
In the relevant price range a demand curve for a Giffen good would be
A) upward sloping. B) downward sloping. C) horizontal. D) vertical.