If the Public Believes the Government's Claim That It Will

question 88

Multiple Choice

If the public believes the government's claim that it will pursue low inflation policies, and the government then turns around and adopts an expansionary policy, then

• A)the IA line will shift up before the AD curve shifts right.
• B)the IA line will shift up after the AD curve shifts right.
• C)the IA line will shift down before the AD curve shifts right.
• D)the IA line will shift down after the AD curve shifts right.
• E)real GDP will not increase.

---

Definitions:

Competitive Spectrum

The range of competition within a market, from monopolies to perfectly competitive markets, affecting pricing, innovation, and consumer choice.

Cartels

Organizations or associations formed by businesses in the same industry to regulate production, prices, and marketing of goods, often to restrict competition.

Oligopoly

A market structure characterized by a small number of firms dominating the market, leading to limited competition.

Business Firms

Organizations involved in the production, distribution, or sale of goods and services for profit.