Compare the following three ways to model expectations: animal spirits, adaptive expectations, and rational expectations
What will be an ideal response?
Animal spirits assumed that expectations were simply random. Adaptive expectations assumed that individuals formed expectations by looking at past changes in a variable. Rational expectations assumed that individuals form expectations by using all currently available information and an understanding of the model and policy.
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Along the aggregate supply curve
A) the horizontal part represents a situation where the economy is operating above full employment levels. B) inflation would be a primary concern along the horizontal part of the aggregate supply curve. C) idle resources, such as labor and capital, would be a feature of the vertical section of the aggregate supply curve. D) the horizontal section of the aggregate supply curve represents the limit of production. E) the middle, upward-sloping part of the aggregate supply curve would be associated with a growing economy that experienced increased prices from resources that are becoming relatively scarce.
Spending VCU4 on real-world goods and services causes the nation's:
a. Demand for real goods and services to rise and monetary base to remain the same. b. Demand for real goods and services to fall and M2 money supply to fall. c. Demand for real goods and services to remain the same and M2 money multiplier to fall. d. Demand for real goods and services to remain the same and M2 money supply to remain the same.
Ray buys a new tractor for $118,000 . He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is
a. $13,000. b. $105,000. c. $118,000. d. $131,000.
The U-shape of the average variable, average total, and marginal cost curves reflects _____
A) increasing marginal returns. B) decreasing marginal returns. C) both increasing and decreasing marginal returns. D) decreasing marginal product. E) the point that implicit costs become a smaller fraction of total cost as output increases.