In the structural stagnation model where the world price level is below the domestic price level, expansionary monetary policy:
A. raises the price level.
B. increases the trade deficit.
C. leads to higher interest rates.
D. lowers domestic output.
Ans: B. increases the trade deficit.
Explanation: In the structural stagnation model, domestic prices are held down by world prices, so expansionary monetary policy does not lead to inflation. Instead it leads to a higher trade deficit. Because all of the increase in expenditures is met by foreign production, the trade deficit rises and domestic production remains unchanged.
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If the wage rate doesn't change but a profit-maximizing competitive firm hires fewer workers, we know that
A) the price of the product increased. B) technical change occurred that increased labor productivity, reducing the firm's demand for labor. C) demand for the product fell or there has been a reduction in labor productivity. D) marginal factor cost increased.
In a dynamic economy under ideal conditions:
a. the unemployment rate should be near zero. b. some unemployment would be present due to workers temporarily being out of work while changing jobs. c. unemployment would tend to move upward slightly as prices increased. d. unemployment would tend to move slightly downward as unemployment compensation benefits increased.
Suppose a perfectly competitive firm wants to increase its level of output profitably. To do this, the firm needs to
a. find a way to lower its marginal cost. b. should raise its price to sell any additional output. c. should lower its price to sell any additional output. d. will not be able to sell the additional output at any price because of the many other competitive firms that exist.
A graphic organizer that is especially useful for showing changes over time is a
a. line graph. b. bar graph. c. pie graph. d. circle graph.