Many economists think that, in the long run, the economy tends to move toward
A. the natural or full-employment rate of unemployment.
B. the natural or full-employment rate of inflation.
C. a severe slump with high unemployment.
D. an accelerating rate of inflation.
Answer: A
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A monetary expansion ________ stock prices due to a decrease in the ________ and an increase in the ________, everything else held constant
A) reduces; future sales price; expected rate of return B) reduces; current dividend; expected rate of return C) increases; required rate of return; future sales price D) increases; required rate of return; dividend growth rate
Fully accommodating monetary policy results in
A) a constant interest rate. B) the simple fiscal-policy multiplier of Chapter 3. C) an increase in the money supply when there is a rise in government spending. D) All of these.
A key point made by the Gordon-Growth model is that the
A) value of a stock depends on investor's expectations about the future profitability of a firm. B) past trends in a stock's behavior indicate future price trends. C) dividends have little to do with a stock's value. D) risk has little effect on a stock's value.
Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is each of the active firms' profit per unit in the short run equilibrium?
A. $3.67 per unit B. $20.33 per unit C. $24.00 per unit D. $6.67 per unit