The Facts Show That the Political Business Cycle Theory

question 80

Multiple Choice

The facts show that the political business cycle theory

• A) does a good job of explaining monetary policy during presidential election years.
• B) is unable to explain monetary policy during presidential election years.
• C) does not generally hold true in the United States.
• D) explains monetary policy best during years in which the president is running for reelection.

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Definitions:

Producer Surplus

The difference between the amount producers are willing to sell a good for and the amount they actually receive.

Price Ceiling

A government-imposed limit on how high a price is charged for a product, service, or commodity, intended to protect consumers from high prices.

Persistent Shortage

A situation where the demand for a good or service consistently exceeds its supply, over a significant period of time.

Deadweight Loss

The loss of economic efficiency when the equilibrium for a good or a service is not achieved or is not achievable.