When the price of a good is below its equilibrium level under perfect competition,
A. consumers would benefit from an expansion of output.
B. some consumers are earning larger consumer’s surpluses than they would in equilibrium.
C. the market is not operating at maximum efficiency.
D. All of the responses are correct.
Answer: D
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Based on the Taylor Principle, a central bank's endogenous response of decreasing interest rates when inflation falls
A) causes an upward movement along the monetary policy curve. B) causes a downward movement along the monetary policy curve. C) shifts the monetary policy curve upward. D) shifts the monetary policy curve downward.
The possibility that unanticipated policy changes are an important source of output fluctuations is most consistent with ________
A) traditional Keynesian theory B) new Keynesian theory C) real business cycle theory D) institutionalist theory