New Keynesians hypothesize that
A) fluctuations in output are largely caused by supply shocks.
B) the relationship between inflation and unemployment is exploitable in the long run.
C) the relationship between inflation and unemployment is exploitable in the short run.
D) there is no relationship between inflation and unemployment.
C
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Market equilibrium occurs where the quantity supplied is equal to the quantity demanded
Indicate whether the statement is true or false
A tax cut initially
A) increases consumption expenditure by an amount greater than the tax cut. B) increases consumption expenditure by an amount equal to the tax cut. C) increases consumption expenditure by an amount that is less than the value of the tax cut. D) has no effect on consumption expenditure. E) reduces consumption expenditure by an amount that is less than the value of the tax cut.
Suppose that because of climatic conditions, the smog levels in Los Angeles suddenly soar to dangerous levels. The most successful policy in this case would be
a. direct controls to limit driving. b. taxes on drivers at rush hours. c. voluntary cooperation to reduce driving. d. removal of autos with excessive emissions.
Which of the following examples would most likely result in a decrease in demand with no immediate effect on supply?
a. A study shows that a brand of soft drink causes cancer. b. A study shows that eating olives significantly reduces heart disease. c. A drought has a devastating effects on the corn crop. d. A factory fire reduces the production of motorcycles.