If wages adjust fully to price increases in the long run, the full effect of fiscal policy is on
A. output.
B. the price level.
C. both output and the price level.
D. neither output nor the price level.
Answer: B
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Which of the following equations based on capital (K) and labor (L) inputs does not represent a plausible production function?
A) F(K,L) = 3KL B) F(K,L) = 3K C) F(K,L) = K + L - 1 D) F(K,L) = 10(KL)0.5
Trade decisions are based on the principle of absolute advantage
a. True b. False Indicate whether the statement is true or false
If banks are currently holding zero excess reserves and the Fed lowers the required reserve ratio, which of the following will happen?
A) Banks will have a reserve deficiency. B) Banks will have positive excess reserves. C) Banks will extend fewer loans. D) Banks will call in some of their loans to meet the reserve deficiency.
Tara deposits money into an account with a nominal interest rate of 6 percent. She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's after-tax real rate of interest
a. will be 2.8 percent if inflation turns out to be 2 percent; it will be higher if inflation turns out to be higher than 2 percent. b. will be 2.8 percent if inflation turns out to be 2 percent; it will be lower if inflation turns out to be higher than 2 percent. c. will be 3.2 percent if inflation turns out to be 2 percent; it will be higher if inflation turns out to be higher than 2 percent. d. will be 3.2 percent if inflation turns out to be 2 percent; it will be lower if inflation turns out to be higher than 2 percent.