The opportunity cost of economic growth is
A) future consumption that a nation gets if it gives up some present consumption.
B) future consumption that a nation gives up to consume more today.
C) present consumption that a nation gives up to accumulate capital.
D) present investment that a nation gives up to increase its economic growth.
C
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Consumer confidence in the economy falls, and as a result, aggregate demand decreases. As real GDP falls below potential GDP, if the Fed followed Friedman's k-percent rule, the Fed would
A) increase the quantity of money more than usual. B) continue allowing the quantity of money to grow at "k" percent. C) increase government expenditures. D) lower the federal funds rate. E) raise the federal funds rate.
Attempts to fine-tune the economy through counter-cyclical monetary policy
A) demonstrated their effectiveness in the 1930s. B) demonstrated their effectiveness during World War II. C) demonstrated their effectiveness between 1945 and 1960. D) have not yet demonstrated their effectiveness.
The rational expectations argument relies on
A) wages and prices being sticky so that changes in expectations about future economic activity and the price level will prevent the short-run aggregate supply curve from shifting quickly to restore long-run equilibrium. B) the ability of monetary policy authorities to identify and respond quickly to close output gaps and restore the economy to its long-run equilibrium. C) wages and prices being sufficiently flexible so that the change in expectations about future economic activity and the price level will allow the short-run aggregate supply curve to shift quickly to restore long-run equilibrium. D) wages and prices being sufficiently flexible so that changes in expectations about future economic activity and the price level will allow the aggregate demand curve to shift quickly to restore long- run equilibrium.
If a monopolist earns positive economic profits in the long run,
A. the industry supply curve shifts to the right. B. the monopolist expands production. C. the monopolist will not change its behavior. D. new firms will enter the market.