The experience of the Volcker disinflation of the early 1980s
a. generally increased estimates of the sacrifice ratio.
b. generally decreased estimates of the sacrifice ratio.
c. clearly refuted the predictions of the proponents of rational expectations.
d. clearly refuted the predictions of the opponents of rational expectations.
b
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Consider a tax cut which affects not only consumer disposable income, but also after-tax earnings from labor supplied to labor markets and from financial assets acquired through saving. In the long run we would expect this tax cut to
A) increase both the price level and the level of real GDP. B) decrease both the price level and increase real GDP. C) increase the price level. D) increase the level of real GDP.
If we have a small standard error, then
A) the estimated coefficient is small. B) the true demand function has imprecise coefficients. C) the expected variation of the estimated coefficient is small. D) the estimated coefficients are imprecise indicators of the true values.
Using the Internal Rate of Return approach to investment, one would undertake an investment if the internal rate of return
A) equals zero. B) equals the interest rate. C) exceeds the interest rate. D) is less than the interest rate.