New Keynesian theorists argue that
A) price and wage adjustments in response to policy changes often overcompensate and cause further price disruptions.
B) prices and wages may not be free to adjust in response to policy changes.
C) unions and big business have considerable power and often choose not to change wages and prices so as to deliberately offset policy changes enacted by the government.
D) the Fed and the Congress rarely do what they say they will do, so one should never listen to what they say.
E) new classical rational expectations theories about how expectations are formed are completely wrong.
B
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All of the following describe trends in the labor markets of the industrialized world EXCEPT:
A. growing wage inequality. B. substantial growth in real wages over the twentieth centaury C. low rates of unemployment in Western Europe. D. a slowdown in real wage growth since the 1970s.
A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7. Assume that the economy is initially in equilibrium. Refer to Scenario 10.2. What is the marginal propensity to save of this economy?
a. 0.2 b. 0.3 c. 0.7 d. 0.9 e. 0.6
What other economic process needs to accompany international trade, for nations to benefit from such trade?
A. Nationalization of industries B. Regulation of production and trade C. Spreading of resources to more industries D. Specialization in production
Why would a chain store sell some items, such as soda pop, below cost?
A) They are not interested always in maximizing profit. B) They feel people need soda pop more than the other items in the store. C) Pricing some items "below cost" might be an efficient strategy to maximize the store's total profit. D) Because most firms can only enjoy profits by consistently selling all their items below cost.