If the economy is initially at long-run equilibrium and aggregate demand expands, then in the long run the price level
a) and output are lower than in the original long-run equilibrium.
b) is higher and output is the same as the original long-run equilibrium.
c) and output are higher than in the original long-run equilibrium.
d) is the same and output is lower than in the original long-run equilibrium.
Ans: b) is higher and output is the same as the original long-run equilibrium.
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Suppose the Fed's primary goal is price stability and it aims to keep the inflation rate at 2%. If the inflation rate rose above 2%, what should it do?
A) pursue an expansionary monetary policy B) pursue a contractionary monetary policy C) reduce the required reserve ratio D) impose a temporary ceiling on the federal funds rate
Other than OPEC, the shortage of gasoline in the U.S. in the 1970s could also be blamed on
a. a sharp increase in the demand for gasoline that was brought on by the Vietnam War. b. the government's policy of maintaining a price ceiling on gasoline. c. an indifference among U.S. consumers toward conservation. d. the lack of substitutes for crude oil.