If there is an inflationary gap, then a 45-degree line exceeds the aggregate expenditure curve at the full-employment level of income.
Answer the following statement true (T) or false (F)
False
The 45-degree line exceeds the aggregate expenditure when there is a recessionary gap and spending would be insufficient to purchase all output.
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What was the main finding of Ramey's study on government expenditure multipliers?
What will be an ideal response?
Suppose that during a given time period the implicit cost for a business was $1,500 and that the explicit cost was $6,000. Also suppose that the firm sold 1,000 units of its products at $7 per item. We can conclude that the firm's
A) accounting profit was $1,000, and its economic profit was -$500. B) accounting and economic profits were both $1000. C) accounting profit was -$500, and economic profit was $1,000. D) accounting profit was $1000, and economic profit was -$1,500.
Answer the following statement(s) true (T) or false (F)
1.The natural rate hypothesis states that the economy will self-correct to the natural rate of unemployment. 2.An unanticipated rise in the inflation rate makes real wages rise. 3.Over time, an increase in aggregate demand will shift the short-run Phillips curve to the right. 4.Adaptive expectations are an individual’s belief that the recent information on inflation and unemployment are poor indicators of the future. 5.A decrease in energy prices would be considered a positive supply shock.
The phenomenon whereby labor decreases in response to a decrease in the wage rate is called
a. the substitution effect. b. the scale effect. c. derived demand from a change in wage. d. the factor regressivity of labor.