Why does the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?
A) Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices.
B) Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.
C) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.
D) Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices.
Answer: C) Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.
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The theory of rational expectations, when applied to financial markets, is known as
A) monetarism. B) the efficient markets hypothesis. C) the theory of strict liability. D) the theory of impossibility.
"The price level may fall but it will not necessarily lower the interest rate, not if we are in a liquidity trap." This is a statement a __________ economist might make as an explanation of why the economy __________ pull out of a recession
A) Classical; will B) Classical; may not be able to C) Keynesian; will D) Keynesian; may not be able to
In what year did spending climb and tax collections fall to historically unusual levels, resulting in enormous deficits?
a. 1990 b. 1999 c. 2001 d. 2007
If the price elasticity of demand (Ep) equals one in the short run, then, other things being equal, in the long run Ep will be
A) one. B) less than one. C) greater than one. D) indeterminate without more information.