Figure 35-8 Use This Graph to Answer the Questions Below

question 21

Multiple Choice

Figure 35-8
Use this graph to answer the questions below.
-Refer to figure 35-8.Suppose the economy starts at 5% unemployment and 3% inflation.If the Federal Reserve pursues an expansionary monetary policy,in the short run the economy moves to

• A)3% unemployment and 5% inflation.In the long run the economy moves to 5% unemployment and 5% inflation.
• B)3% unemployment and 5% inflation.In the long run the economy moves to 3% unemployment and 5% inflation.
• C)7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 5% inflation.
• D)7% unemployment and 3% inflation.In the long run the economy moves to 5% unemployment and 3% inflation.

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Definitions:

Covert Collusion

Secret or concealed agreements between firms to fix prices, limit production, or divide markets, in order to increase profits illegally.

Demand Curve

A graphical representation of the demand schedule showing the inverse relationship between price and quantity demanded.

Oligopoly

A market structure characterized by a small number of firms that have significant control over market prices and competition.

Product Differentiation

The distinction between or among goods and services made in the minds of buyers.