In the Last Half of the 1990s, the Usual Short-Run

question 231

Multiple Choice

In the last half of the 1990s, the usual short-run trade-off between inflation and unemployment did not arise because

• A) the Fed held interest rates constant.
• B) the federal government balanced its budget.
• C) the U.S. personal savings rate rose.
• D) productivity (and thus aggregate supply) grew faster than previously.

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Definitions:

Resource Demand

The desire and ability of consumers or firms to acquire specific quantities of resources at various prices.

Marginal Revenue Product

The increased earnings resulting from the application of an extra unit of a resource, such as capital or labor.

Demand Schedule

A diagram indicating the volume of goods or services that purchasers intend and can afford to buy across a range of prices.

Purely Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a product that is identical across suppliers.