Rational expectations theory suggests that government or central bank policies designed to change aggregate demand will be effective
a. True
b. False
Indicate whether the statement is true or false
False
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Refer to the figure below.________ inflation will eventually move the economy pictured in the diagram from short-run equilibrium at point ________ to long-run equilibrium at point ________, 
A. Rising; B; C B. Falling; A; C C. Falling; A; B D. Rising; A; C
When would sunk costs be irrelevant for current decision making?
a. when the sunk costs are computed using accounting methods b. when the sunk costs are greater than variable costs c. when the sunk costs have been incurred only a short time ago d. Sunk cost are always irrelevant when making current decisions.
If UIP holds and the home currency is expected to appreciate by 4%, then the home interest rate is:
a. 6% b. 5% c. 4% d. Not enough information is provided to answer the question
Purchasing power parity holds when the exchange rate is equal to the product of the foreign price level and the domestic price level
a. True b. False Indicate whether the statement is true or false