According to the theory of rational expectations, the "fooling" of workers in Friedman's model
A) is rational, since sudden unforeseeable changes in aggregate demand can and do occur.
B) is rational, since workers are always on their labor supply curve.
C) is not rational, since workers should learn to immediately link unexpected wage changes to wrongly-forecast price levels.
D) is not rational, since workers are often thrown off of their labor supply curve.
C
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Suppose a monopolist is considering starting a $500,000 advertising campaign. The current demand for its product is given by
p = 150 - 3Q where Q is the quantity of output in thousands. If the monopolist undertakes the advertising campaign, it expects demand to increase to p = 200 - 4Q The (non-advertising) cost for the monopolist is C(Q) = 30Q. a. Determine whether the monopolist should undertake the advertising campaign assuming that it is correctly anticipating the potential increase in demand. b. What is the most the monopolist will invest towards this advertising campaign?
The school of thought that assumes that real GDP is determined by aggregate supply, whereas the equilibrium price level is determined by aggregate demand is known as _____
a. neoclassical economics b. classical economics c. new Keynesian economics d. Keynesian economics e. Marxist economics
Pizza is a normal good if the demand
a. for pizza rises when income rises. b. for pizza rises when the price of pizza falls. c. curve for pizza slopes upward. d. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.
Lines at gas pumps were caused by _____________ in the 1970's.
A. price floors B. price ceilings C. market equilibrium D. increased demand