The classical theory of inflation:
A. shows neutrality of money in the long run.
B. describes a long-run equilibrium.
C. explains the direct relationship between money supply and the price level.
D. All of these statements are true.
Answer: D
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Emotions like guilt and sympathy:
A. are irrelevant to economic decision-making. B. can solve commitment problems, but generally reduce players' payoffs. C. can solve commitment problems. D. reduce the likelihood that a transaction will maximize total economic surplus.
The minimum wage is a
A) factor that decreases unemployment because fewer people search for work if the minimum wage is increased. B) possible cause of job search because it lowers wages below their equilibrium. C) possible cause of job rationing because it raises wages above their equilibrium. D) possible cause of job rationing because it lowers wages below their equilibrium. E) government established highest wage that is legal to pay.
In a monopolistically competitive industry
A) firms can make an economic profit in the long run because of barriers to entry. B) the firms can never make an economic profit. C) if firms are making an economic profit, new firms enter the industry. D) firms can make an economic profit in the long run because of product differentiation.
Which of the following statements about monetary policy is correct?
a. Whatever happens with aggregate supply and aggregate demand in the long run, monetary policy can be used to prevent inflation from becoming entrenched in the economy in the short and medium term. b. Whatever happens with aggregate supply and aggregate demand in the short run, monetary policy can be used to prevent inflation from becoming entrenched in the economy in the medium and long term. c. Whatever happens with aggregate supply and aggregate demand in the short and medium run, monetary policy can be used to prevent inflation from becoming entrenched in the economy in the long term. d. Whatever happens with aggregate supply and aggregate demand in the medium and long run, monetary policy can be used to prevent inflation from becoming entrenched in the economy in the short term.