One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy:
A. has a greater multiplier effect than discretionary policy.
B. is not subject to the timing problems of discretionary policy.
C. makes the actual budget a better reflection of the condition of the economy than the full-employment budget.
D. does not produce a cyclical deficit as discretionary policy does.
Answer: B
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The idea that economic agents do not make systematic errors because they use all information efficiently is called the
A) consistency hypothesis. B) rational expectations hypothesis. C) information efficiency hypothesis. D) principle of maximizing behavior.
The optimal bidding strategy for a second-price auction is
a. To bid your true value b. To shade your bid well below your true value c. To shade your bid just a little below your true value d. To size up your competition to determine how much to shade your bid
With rational expectations, a correctly anticipated policy that would increase AD would lead to: a. higher inflation and lower unemployment in the short run
b. higher inflation and higher unemployment in the short run. c. higher inflation and no change in unemployment in the short run. d. lower inflation and lower unemployment in the short run.
The market's contribution to the general welfare has been its
a. stimulation of growth in productivity. b. yield of an abundance of consumers' goods. c. contribution to human longevity. d. All of the above are correct.