What would lead an economist to conclude that Theory A is superior to Theory B?
A. Theory A explains how people think, whereas Theory B only explains what they do.
B. Theory A is based on the assumption that an individual typically cannot determine what is in his or her own best interest, whereas Theory B assumes that each person knows what is in his or her own best interest and acts accordingly.
C. The assumptions underlying Theory A are more realistic than are the assumptions underlying Theory B.
D. Theory A predicts real-world events better than does Theory B.
Answer: D
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The Kennedy Tax Cut, enacted in 1964 after his death, was the first supply-side tax cut used in U.S. history. Its intent was to stimulate the economy by reducing tax rates in order to do what?
(a) Reduce supply (b) Increase production, employment and disposable income (c) Increase government spending (d) Increase the money supply
Suppose a central bank announced that it was going to make a serious effort to fight inflation. A few years later the inflation rate is lower, but there had been a serious recession. We could conclude with certainty that
a. the rational expectations hypothesis is false. b. the rational expectations hypothesis is true. c. the policymakers lacked credibility. d. None of the above is certain.
Which of the books used at the FOMC meetings is/are treated as secret documents and not released to the public until after a number of years have passed?
A. The Bluebook and the Greenbook B. The Bluebook and the Beigebook C. The Tealbook D. The Beigebook and the Greenbook
Keynesians believe that the difference between using an increase in the money supply compared with an increase in government spending to increase aggregate demand in the event of a recession is that if government spending is increased, ________ will be ________ than if the money supply is increased.
A. the price level; higher B. the price level; lower C. real interest rate; lower D. real interest rate; higher