Answer the following statements true (T) or false (F)
1) The idea that the economy will "self-correct" when confronted with changes in aggregate
demand is associated with new classical economics.
2) In the new classical theory, a fully anticipated change in aggregate demand and the price level
will temporarily change real output, but an unanticipated change will not.
3) Mainstream economists say that recessions are unlikely to occur today because prices and
wages are highly flexible downward.
4) Efficiency wage theory says that an above-market wage can reduce labor costs per unit of
output by eliciting greater work effort, lowering supervision costs, and reducing job turnover.
1) T
2) F
3) F
4) T
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When currency outstanding decreases,
A) gold certificates rise. B) the money supply increases. C) Fed assets decline. D) bank deposits at the Fed increase.
Give at least three examples from economics where you expect some nonlinearity in the relationship between variables. Interpret the slope in each case
What will be an ideal response?
A monopolist is producing at an output level at which ATC = $5, P = $6, MC = $3, and MR = $4. We can conclude that
A) economic profit could be increased by producing more. B) economic profit could be increased by producing less. C) economic profit cannot be increased. D) the firm is earning $10 in economic profits.
When a country has a comparative advantage in producing a certain good,
a. the country should import that good. b. the country should produce just enough of that good for its own consumption. c. the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good. d. None of the above is correct.