Suppose the Fed has just learned that some foreign economies are headed for recession, which will reduce U.S. exports. This is an economic shock that shifts the IS curve down
What would you do in response to the shock if you want to keep the economy at full-employment equilibrium under each of the following cases? (a) You use the classical (RBC) model. (b) You use the Keynesian (efficiency wage) model. (c) You use the extended classical model with misperceptions. In each case, show the IS—LM—FE diagram associated with your answer.
(a) Do nothing, let P adjust.
(b) Increase the money supply, shifting LM to the right.
(c) Do nothing if the IS shift was anticipated; could increase money supply if the IS shift was unanticipated and the money supply change would be unanticipated; or you could inform people about the IS shock, so they would build it into their expectations.
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The income elasticity of demand for jewelry is 2. Other things equal, a 10% increase in consumer income will ________ the quantity of jewelry demanded by ________
A. decrease; 5%. B. increase; 5%. C. increase; 20%. D. decrease; 20%.
In the labor market, if the government imposes a minimum wage that is below the equilibrium wage, then
A) workers who wish to work at the minimum wage will have a difficult time finding jobs. B) firms will hire fewer workers than without the minimum wage law. C) some workers may lose their jobs as a result. D) nothing will happen to the wage rate or employment.
The maximin criterion can be defined as which of the following?
A. One seeks the maximum of the minimum payoffs to the various available strategies. B. One seeks the minimum of the maximum losses among the various available strategies. C. One seeks the maximum of the minimum losses to the various available strategies. D. One seeks the maximum of the maximum gains of the various available strategies.
When a muscle attaches to a bone, the end that does not move is the:
A. insertion. B. origin. C. root. D. tendon.