Why is there no long-run trade-off between unemployment and inflation?
What will be an ideal response?
Because when the labor market is so tight as to cause wages and prices to rise, the resulting inflation intensifies the pressure on wages and prices (by reducing the real wage and increasing expected inflation). Since the inflation in no way "balances" or "compensates" for the low level of unemployment, the condition of "too low" unemployment is unsustainable in the long run.
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Which of the following is a possible outcome of setting a legal maximum rental rate below the market clearing rental rate?
A) an increase in the quantity of rental housing supplied B) a decrease in the quantity of rental housing demanded C) a black market in rental housing D) a surplus of rental housing
Economists make the general assumption that:
A. people are rational, but their behavior doesn't always follow this assumption. B. people are irrational, but there are some correlations in behavior that have been proven. C. people are rational, but this doesn't really ever resemble reality. D. people are irrational, but this is too difficult to put into a model.
The statement that Computech's profits totaled $500 million last year represents the use of money as a:
a. medium of exchange. b. store of value. c. unit of account. d. means of coincidence.
The tendency of those who are insured to take more risks as a result is a problem of: a. free riding
b. moral hazard. c. adverse selection. d. positive externalities.