Which of the following statements correctly identifies a reason why inflation can be used as a countercyclical policy tool?
A) Inflation sometimes increases the demand for workers that increases output and helps combat slowdowns.
B) Inflation reduces money costs and hence stimulates an economy during slowdowns.
C) Inflation increases consumer demand which is necessary for combating slowdowns.
D) Inflation increases consumer confidence, which is an absolute necessity to counter act business cycles.
A
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Labor unions
a. raise wages in unionized industries. b. create labor shortages in non-unionized industries. c. play a larger role in the current U.S. economy than in European countries such as Norway and Sweden. d. prefer to operate in states with right-to-work laws.
Refer to the accompanying figure, which shows the annual domestic supply and annual domestic demand for jeans in a small country.
Suppose this country is open to trade with the rest of the world, and the world price of a pair of jeans is $40. If the government imposes a quota on imported jeans of 12,000 pairs per year, then the new equilibrium price of jeans in this country will be:
A. $80 B. $60 C. $120 D. $100