With rational expectations, a policy that would increase AD would lead to:
a. higher inflation and higher real output in the short run
b. higher inflation and lower real output in the short run.
c. higher inflation and an indeterminate effect on real output in the short run, if people's expectations were correct.
d. higher inflation and no change in real output, if people's expectations were correct in the short-run.
d
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In a competitive free market:
A) all exchanges take place involuntarily. B) there is only one seller and many buyers. C) the government does not impose price controls. D) there is no provision for the protection of property rights.
When the price of only one good rises, the relative price of that good
A) falls. B) rises. C) does not change. D) rises if it is a normal good and falls if it is an inferior good.
More risk-averse people will:
a. hold fewer risky assets because marginal utility is rapidly diminishing. b. hold fewer risky assets because marginal utility is greater. c. hold fewer risky assets because rates of return are more uncertain. d. hold fewer risky assets because marginal utility is negative.
If net exports decrease by $10 billion and the MPC is 0.9, what is the ultimate change in GDP?
a. $100 billion b. -$10 billion c. $10 billion d. -$100 billion e. -$9 billion