Figure 12.6: IS-MP Curve

question 111

Multiple Choice

Figure 12.6: IS-MP Curve
-Start from any equilibrium in Figure 12.6 to answer the following question. In 1980, U.S. inflation hit about 14 percent; Federal Reserve chairman ________ engineered a decline in inflation by ________ rates, shown in the figure as movement from point ________.

• A) Volcker; raising inflation; b to c
• B) Bernanke; raising interest; b to d
• C) Volcker; lowering interest; c to b
• D) Volcker; raising interest; b to c
• E) Greenspan; lowering interest; a to b

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Definitions:

Midpoint Method

A technique used in economics to calculate the elasticity of a variable, using the average of initial and final values as reference points.

Unit Elastic

Describes a situation where the change in quantity demanded or supplied is exactly proportional to the change in price.

Midpoint Method

A method employed in economics for determining demand or supply elasticity through calculating the mean of the initial and final prices and quantities.

Price Elasticity

A measure of how much the quantity demanded or supplied of a good or service changes in response to a change in its price.