In Comparing the Lags of the Effects of Monetary Policy

question 29

Multiple Choice

In comparing the lags of the effects of monetary policy

• A) determining the effects on prices is easier than the effect on GDP.
• B) GDP effects take much longer to show up than price effects.
• C) the economy's predictable response simplifies monetary policy.
• D) price effects take much longer to show up than GDP effects.
• E) both effects take about the same time to show up.

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Definitions:

Selling Price

The amount of money for which something is sold to a buyer, after considering production, marketing, and distribution costs.

Fixed Cost

Fixed costs, including rent, salaries, and insurance, stay the same no matter how much is produced or sold.

Contribution Margin

The amount remaining from sales revenue after variable costs are deducted, contributing towards covering fixed costs and earning profit.

Break Even Point

The point at which total costs and total revenue are equal, meaning the business is neither making a loss nor a profit.