Economists of the rational expectations school believe that if the economy is already producing its potential output, an expansionary monetary policy, if fully and correctly anticipated, will have no effect on output or employment
Indicate whether the statement is true or false
true
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Per capita income is calculated as:
a. national income divided by number of households. b. national income divided by number of people. c. number of households divided by national income. d. number of people divided by national income. e. number of people divided by domestic income.
Which of the following statements is FALSE?
A) An increase in income causes an increase in the demand for a normal good. B) An increase in income causes a decrease in the demand for an inferior good. C) A decrease in income causes the demand curve for a normal good to shift to the left. D) An increase in income causes the demand curve for an inferior good to shift to the right.
The real-income effect refers to
A) the law of diminishing marginal utility. B) the want-satisfying power of a good or service. C) substitution of less expensive commodities for more expensive commodities. D) the change in purchasing power when the price of a good changes.
The theory of rational expectations concludes that
A. since expectations can cause discretionary stabilization policies to be pro-cyclical, it is better to rely upon policy rules. B. discretionary monetary policy is a more powerful stabilization device than is discretionary fiscal policy. C. discretionary fiscal policy is a more powerful stabilization device than is discretionary monetary policy. D. discretionary policies are more effective than rules in stabilizing the economy.