A conclusion of the theory of rational expectations is that, in the short run, the impact of discretionary fiscal policies designed to shift the AD curve will:
a. result in no net change in AD once people's expectations adjustments have been accounted for
b. shift AD in the opposite direction intended once people's expectations adjustments have been accounted for.
c. be anticipated and compensated for, causing no significant effect on real GDP or employment if people's anticipations are correct.
d. have to be anticipated to change real output in the intended direction.
c
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This refers to an increase in government spending that produces a reduction in private spending
A) crowding out. B) investment disappointment. C) social loss. D) deadweight loss.
Stability of the U.S. economy between 1985 and 2007 referred to as
A) Great Moderation. B) the Great Depression. C) Automatic Stabilizer. D) Fiscal Discretion.
Product differentiation allows a firm to charge a higher price because the residual demand curve facing the firm
A) is more elastic than the residual demand curve without product differentiation. B) is less elastic than the residual demand curve without product differentiation. C) is horizontal. D) shifts to the left.
Recall the Application about how having car insurance affects driving behavior to answer the following question(s).Recall the Application. The theory of moral hazard suggests that uninsured drivers drive less carefully than insured drivers.
Answer the following statement true (T) or false (F)