A Central Bank Might Decide to "Validate" a Negative Supply

question 43

Multiple Choice

A central bank might decide to "validate" a negative supply shock because

• A)there is no other way to return the economy to full employment.
• B)the economy might suffer a long slump before wages and prices fall enough to restore full employment.
• C)there is no process by which the economy will return to potential output.
• D)it is an effective means of preventing inflation.
• E)there are no negative effects from this policy action.

Distinguish between bilateral and unilateral contracts.

Identify the enforceability of promises and modifications in preexisting contracts.

Analyze the legal effect of an illusory promise and gratuitous promises in contract law.

Explain the importance of legal detriment and legal benefit in the context of enforceable contracts.