Refer to the Following Figure When Answering

question 70

Multiple Choice

Refer to the following figure when answering
Figure 13.4: AS/AD Model
-Use the aggregate supply/aggregate demand model in Figure 13.4 to answer the following scenario. In the 1990s, Japan experienced a prolonged sluggish economy. If the Bank of Japan targeted inflation, it would have responded to this situation by ________, pushing the economy from point ________ to point ________; eventually the economy would have returned to the steady state at point ________.

• A) raising the inflation target rate; a; b; c
• B) lowering the inflation target rate; a; b; c
• C) raising the inflation target rate; a; d; c
• D) lowering the inflation target rate; c; d; a
• E) Not enough information is given.

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Definitions:

Market Demand Curve

A graphical representation showing the relationship between the quantity of a good consumers are willing and able to purchase and the price of the good.

Profit-maximizing Output

The level of production at which a business achieves the highest possible profit.

Cournot Model

An economic model used to describe an industry structure in which companies compete on the amount of output they will produce, which they decide upon independently of each other and at the same time.

Prevail

To be widespread or dominant, or to win against opposing forces.