In 1979, Fed chair Paul Volcker decided to pursue a policy
a. that would lead to disinflation.
b. that would create falling prices.
c. to accommodate continuing adverse supply shocks.
d. that maintained money growth at its current level.
a
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Refer to Reducing Long-Run Labor Usage. The diagram illustrates the situation where
a. the long-run demand for labor is upward sloping.
b. the scale effect reinforces the substitution effect.
c. the higher wage raises the firm's long-run marginal costs.
d. labor is a regressive factor.
With a rise in the rate of depreciation that ________, the user cost of capital falls, leading to a ________ capital-labor ratio, thus a ________ in investment
A) actually occurs to capital, higher, rise B) actually occurs to capital, lower, rise C) actually occurs to capital, lower, fall D) is used to calculate corporate taxes, higher, rise E) is used to calculate corporate taxes, lower, fall
The Federal Reserve econometric model estimates that a 1 percent increase in government spending, with the money supply held constant, will
A) increase real GDP by 1 percent per year for two years. B) increase real GDP by 2 percent per year for two years. C) decrease real GDP by 1 percent per year for two years. D) have no effect on real GDP.
In a price system, changes in prices
A. signal to everyone in the system what goods are relatively more or less scarce. B. signal to policy makers what goods should and should not be taxed more. C. make it difficult for the system to function well. D. imply that people have made mistakes in the past.