Refer to the above figure. The rational expectations hypothesis implies that an anticipated decrease in aggregate demand from AD2 to AD1 will
A. shift the aggregate supply (AS) curve to the left.
B. move the economy from b to c.
C. move the economy from c to a.
D. move the economy from b to a.
Answer: D
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Indicate whether the statement is true or false
If there is no Ricardo-Barro effect, an increase in the government budget surplus
A) increases the supply of loanable funds. B) decreases private saving. C) increases private saving. D) decreases the supply of loanable funds. E) has no effect on the demand for loanable funds, the supply of loanable funds, or the real interest rate.
If, due to a recession, foreign workers begin to leave the United States to search for temporary work in their home countries until the recession has ended, this will
A) move the home country's economy up along a stationary short-run aggregate supply curve. B) shift the short-run aggregate supply curve of the home country to the left. C) shift the short-run aggregate supply curve of the home country to the right. D) move the home country's economy down along a stationary short-run aggregate supply curve.
A positive externality exists and government wants to impose a subsidy in order to bring about an efficient outcome. To accomplish its objective, government must set the subsidy equal to marginal
A. private cost. B. social benefit. C. external cost. D. social cost. E. external benefit.