The Fed generally had ________ interest rates in the 1970s and early 1980s to fight ________.
A. low; inflation
B. high; recession
C. low; recession
D. high; inflation
Answer: D
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"The bias in the CPI distorts private contracts because a future payment that is linked to the CPI will be raised above the true increase in the price level." Is the previous sentence true or false?
What will be an ideal response?
The new Keynesian theories of efficiency wages imply
a. nominal wage rigidity. b. real wage rigidity. c. changes in unemployment represent changes in the natural rate of unemployment. d. market clearing in the labor market in the long-run. e. None of the above
If the demand for product X is inelastic, a 4 percent increase in the price of X will:
A. decrease the quantity of X demanded by more than 4 percent. B. decrease the quantity of X demanded by less than 4 percent. C. increase the quantity of X demanded by more than 4 percent. D. increase the quantity of X demanded by less than 4 percent.
Which of the following statements is false?
A. If the United States imposes a tariff on Japanese car imports, the price of cars in the United States is likely to increase. B. If the United States imposes a quota on Japanese car imports, the price of cars in the United States is likely to increase. C. If Japan imposes a "voluntary export restraint" on car exports to the United States, the price of cars in the United States is likely to increase. D. If Japan imposes a subsidy on car exports to the United States, the price of cars in the United States is likely to increase.