Differentiate between the adaptive expectations and the rational expectations models of inflation
What will be an ideal response?
The adaptive expectations model of inflation states that inflationary expectations are determined by the level of inflation in the recent past. Conversely, the rational expectations model assumes that people have highly sophisticated beliefs about inflation that rationally incorporate all the information available to them.
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The primary reason the federal budgeting process changed in 1921 was that _____
a. the level of government expenditures were increasing b. the President wanted more power c. federal agencies wanted less responsibility d. World War II forced the military to get involved
The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the
a. tax revenue raised by the government as the result of the tax. b. loss of potential gains from trade from activities forgone because of the tax. c. increase in the price of an activity as the result of the tax levied on it. d. marginal benefits derived from the expansion in government activities made possible by the increase in tax revenues.
Assume the central bank decides to raise the discount rate. Where and how should you begin your analysis when analyzing the chain reaction of economic interactions?
a. Start the analysis in the real goods market with aggregate demand shifting to the left. b. Start the analysis in the real goods market with aggregate demand shifting to the right. c. Start the analysis in the real credit market with demand for real credit shifting to the left. d. Start the analysis in the real credit market with demand for real credit shifting to the right. e. Start the analysis in the real credit market with supply of real credit shifting to the left.
Figure 33.2 illustrates Lorenz curves for four different economies. Which economy should have a Gini coefficient of zero?
A. A. B. B. C. C. D. D.