The Short-Run Impact of an Unanticipated Shift to a More

question 21

Multiple Choice

The short-run impact of an unanticipated shift to a more restrictive monetary policy is most likely to be a reduction in

• A) prices, while real output is unaffected.
• B) the rate of unemployment.
• C) real output.
• D) the size of the budget deficit.

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Definitions:

Market Price

The present cost at which an item or service is available for purchase or sale in a market.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved or is not achievable.

Equilibrium

A state in a market where the quantity demanded equals the quantity supplied, resulting in a stable market price.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.