What are the macroeconomic policy implications of the rational expectations hypothesis? What should policy makers do and not do?
The hypothesis implies that macro-policy will have unpredictable effects. Therefore, if decision makers have rational expectations, the best policies are preannounced and stable. These types of policies will allow people to form expectations accurately. Macroeconomic policy should focus on long-term objectives and not attempt to fine-tune the economy.
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At a perfectly competitive firm’s short-run equilibrium level of output,
A. P = MR = MC. B. P = MR, but MR does not equal MC. C. P = MC, but MR does not equal MC. D. MR = MC and P < MR.
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: Name of CompanyRevenuesCost of Purchased InputsCitrus Growers Inc.$0.750Florida Jam Company$2.00$0.75The Corner Store$2.50$2.00 If the oranges were grown and the jam produced in the year 2017, but the marmalade was sold at The Corner Store in the year 2018, what is the contribution of these transactions to GDP in the year 2018?
A. $2.00 B. $0.00 C. $0.50 D. $2.50
Many developing countries face a balance of payments constraint because:
A. they fail to implement exchange rate policy correctly. B. they hold too few international reserves. C. they hold too many international reserves. D. the IMF forces them to adopt policies that are counterproductive.
Suppose the production function for T-shirts can be represented as q = L0.25K0.75. Show that the production function has constant returns to scale
What will be an ideal response?