If Both Money Demand and Commodity Demand Are Unstable,as Many

question 16

Multiple Choice

If both money demand and commodity demand are unstable,as many activists believe,which type of policy target(s) would most likely lead to a stable economy (assuming supply-side shocks are likely to occur) ?

• A)money supply target
• B)real GDP target
• C)interest rate target
• D)nominal GDP

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Definitions:

Deadweight Loss

A loss in economic efficiency that occurs when the optimal quantity of a good or service is not produced or traded.

Labor Markets

Economic marketplaces where labor services are bought and sold, and wages, employment levels, and working conditions are determined.

Inelastic Supply

A situation where the quantity supplied of a good or service is relatively unresponsive to changes in its price.

Labor Supply

The total hours that workers in an economy are willing to work at a given real wage rate.