Which statement is TRUE when rational expectations exist and there is a change in monetary policy which is unexpected?
A. The change in monetary policy does not change equilibrium in either the short-run or long-run.
B. The change in monetary policy leads to a simultaneous shift of the short-run aggregate supply curve.
C. The change in monetary policy leads to a change in aggregate demand that leads to a temporary short-run equilibrium that is different from the long-run equilibrium.
D. The change in monetary policy lead to a simultaneous shift in the long-run aggregate supply curve.
Answer: C
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Classical economists think general equilibrium is attained relatively quickly because
A) the real interest rate adjusts quickly. B) the level of output adjusts quickly. C) the real wage rate adjusts quickly. D) the price level adjusts quickly.
In order to conclude that markets are efficient, we assume that they are perfectly competitive
a. True b. False Indicate whether the statement is true or false
As the price level falls
a. people will want to hold more money, so the interest rate rises. b. people will want to hold more money, so the interest rate falls. c. people will want to hold less money, so the interest rate falls. d. people will want to hold less money, so the interest rate rises.
The minimum wage
A. leads to an increase in the number of people employed in unskilled jobs. B. is an example of a price floor. C. causes an increase in social welfare. D. leads to a decrease in the number of people employed in skilled jobs.