Refer to the graph below. Assume that the economy is in initial equilibrium where AD1 intersects AS1. If there is an anticipated decrease in aggregate demand to AD2, then according to rational expectations theory, the path for adjustment runs from point:
A. A to B to C
B. A to D to C
C. A directly to C
D. A directly to D
C. A directly to C
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In real business cycle models, business cycles are caused by ______, while in new Keynesian model, business cycles are caused by ________
a. aggregate demand; aggregate demand b. aggregate demand; aggregate supply. c. aggregate supply; aggregate demand. d. fiscal policy; monetary policy
Which of the following shows a contrast between Economist A, who is concerned with individual liberty, and Economist B, who is concerned with an unfair distribution of power?
a. Economist A wants more government programs; Economist B wants to hire fewer government employees. b. Economist A wants more government programs; Economist B want less government involvement. c. Economist A wants to hire more government employees; Economist B want to lower taxes. d. Economist A wants less government involvement; Economist B wants more government programs.
The U.S. dollar is called a ________ because it is often used as an intermediary to accomplish trading between two other currencies.
A. common currency B. main currency C. vehicle currency D. primary currency
If Alberto Reyes increases his work hours when his real wage increases, then
A) the substitution effect of the wage increase outweighs the income effect. B) the income effect of the wage increase outweighs the substitution effect. C) leisure is an inferior good to Alberto. D) the substitution effect of the wage increase is completely offset by the income effect.