Stagflation caused by a negative supply shock makes macroeconomic policy very difficult; trying to reduce the size of a recession caused by the shock leads to a higher price level.
a. True
b. False
Indicate whether the statement is true or false
Question 2
If the government wanted a tax to raise a great deal of revenue but not burden producers much, it would want to tax an industry with
a. elastic supply and demand curves.
b. inelastic supply and demand curves.
c. inelastic supply and elastic demand.
d. elastic supply and inelastic demand.
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