Contractionary monetary policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
Answer: D
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Labor productivity increased so much in the second half of the 1990s because of
A) improved information and communications technologies. B) higher levels of educational attainment by workers. C) cheaper foreign imports used in production. D) increased foreign competition.
An effluent fee is imposed on a steel firm to reduce the amount of waste materials that it dumps in a river. Use the following two statements to answer this question:
I. The more easily factors of production can be substituted for one another (for example, capital can be used to reduce waste water), the more effective the fee will be in reducing effluent. II. The greater the degree of substitution of capital for waste water, the less the firm will have to pay in effluent fees. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.
An in-kind gift causes the budget line to:
A. rotate counterclockwise. B. shift to the left in a parallel fashion. C. shift to the right in a parallel fashion. D. None of the statements is correct.
When promoting average cost pricing, regulators
A) include what they consider to be a normal rate of return on investment. B) encourage firms to produce at the output level where price equals marginal cost. C) fail to consider a return to investors, so regulated firms often have a hard time raising investment funds. D) inflate costs so much that price ends up as large as would prevail under unregulated monopoly.