Discuss the relationship between the aggregate supply curve and the short-run Phillips curve
What will be an ideal response?
The short-run Phillips curve and the aggregate supply curve arise because the money wage rate does not change in the short run. When the price level increases, the inflation rate is positive. And when the price level increases, the money wage rate does not change, so the real wage rate declines. As a result of the lower real wage rate, the quantity of labor employed increases so that the quantity of real GDP increases and the unemployment rate decreases. Therefore the higher price level is associated with an increase in real GDP and a higher inflation rate is associated with a decrease in unemployment.
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Answer the following statements true (T) or false (F)
1. Most economists today would agree with the view that "money doesn't matter" in macroeconomic theory. 2. Rational expectations theory allows for temporary changes in output due to expansionary policy, whereas adaptive expectations theory holds that no such changes in output could occur. 3. Mainstream economists have adopted some ideas from RET and some rational expectations assumptions are being incorporated into current macroeconomic models. 4. Monetarists and rational expectation theorists believe that cost-push inflation as impossible in the long run in the absence of excessive money supply growth.
Holding constant risk and the real returns available abroad, lower domestic real interest rates ________ capital inflows, ________ capital outflows, and ________ net capital inflows.
A. decrease; increase; decrease B. increase; increase; decrease C. increase; decrease; increase D. increase; increase; increase
List and explain factors that influence consumption expenditure
What will be an ideal response?
In a market with a rent ceiling set below the equilibrium rent, the producer and consumer surplus
A) both increase. B) both decrease, but generally not to zero. C) do not change. D) are eliminated. E) are both totally converted into deadweight loss.