What do rational expectations theorists believe? What is their critics' point of view?
Rational expectation economists believe that wages and prices are flexible and thus should be left free from direct government intervention. They also believe that workers and consumers quickly form accurate expectations about the effects of government policies, and adapt to them, which essentially eliminates the ability of government policy to effectively manage or control the economy.
Critics of rational expectation theory believe that most people are not truly informed about the effects of a policy change and therefore do not adjust their behavior very quickly or completely. Additionally, they question whether prices and wages are really that flexible.
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If nothing else changes, the ________ the current exchange rate, the ________ is the expected profit from holding dollars, all other things remaining the same
A) higher; larger B) lower; smaller C) lower; larger D) The premise of the question is wrong because the exchange rate has nothing to do with expected profit from holding dollars.
In 1947, which of the following activities were not made illegal for labor unions to do?
a. Coerce employees who are working at a firm to join a union b. Discriminate against employees c. Encourage employees to engage in a strike to force one employer to cease doing business with another employer d. Collect membership dues
If we assume that a unit of capital will last indefinitely, the marginal rate of return on investment equals the marginal revenue product of capital divided by its marginal resource cost
a. True b. False
Resources that flow through the circular flow model include all of the following except:
a. land. b. labor. c. capital. d. final goods.