In the long run, if the Fed lowers the inflation rate and holds it at that new rate,
a. a zero inflation rate will be reached
b. a recession will not occur
c. inflationary expectations will fall
d. the natural rate of unemployment will rise
e. structural unemployment will start to decrease
C
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The demand for a good with many substitutes is: a. relatively elastic
b. relatively inelastic. c. perfectly inelastic. d. unit elastic.
If the cost efficiency of labor equals 2, then
A. The product price is 200 percent of the wage rate. B. Each extra dollar spent on wages returns 2 units of additional output. C. The wage rate is 100 percent more than the product price. D. Labor costs 100 percent more than the revenue it generates.
The Fed uses a "core" price index, one that excludes food and energy prices to measure inflation. It does so because
A) food and energy have inelastic demand curves and consumers will buy them regardless of their price. B) it wants to avoid the blame for high gasoline prices causing inflation. C) food and energy prices have wide swings that are not related to the causes of general inflation. D) food and energy prices do not change all that much during the short run, so are irrelevant to the calculation of inflation.
A country that has a capital account surplus:
A. is a net buyer of assets. B. has a current account surplus. C. will see its currency remain steady. D. is a net seller of assets.