Long–Run Consequences of Stabilization Policies
Which of the following policy combinations would be most effective in addressing a recessionary gap?
To counteract a recession, the government implements expansionary fiscal policy. Which action describes this policy?
Suppose the economy is experiencing high inflation. Which combination of fiscal and monetary policies would be most appropriate to stabilize the economy?
According to the Phillips Curve, what is the typical relationship between inflation and unemployment in the short run?
If an economy is operating on the Long-Run Phillips Curve (LRPC), which of the following is true?
Suppose a supply shock causes a sudden increase in inflation. What is the most likely short-run effect on the Phillips Curve?
According to the Quantity Theory of Money, if the money supply increases and velocity and output are constant, what will happen to the price level?
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Assume the money supply increases by 5%, velocity is constant, and real output is constant. According to the quantity theory of money, by how much will the price level change?
Suppose the money supply doubles, but at the same time, the velocity of money decreases by half. Assuming output remains constant, what is the effect on the price level according to the quantity theory of money?
What is the key difference between a budget deficit and the national debt?