Answer the following statements true (T) or false (F)
1. Rational expectations theory suggests that people make consistent forecasting errors regarding the effects of policy.
2. Mainstream economists contend that monetary policy tends to be destabilizing, in contrast to monetarists who believe that monetary policy is a stabilizing factor.
3. An efficiency wage is an above-market wage that spurs greater work effort and gives the firm more profits because of lower wage costs per unit of output.
4. The "efficiency wage" is one possible explanation for rigidities in the economy that leads to economic instability.
5. Monetarists recommend that the supply of money should be increased at a constant rate each year, proportionate with the long-run growth of real output.
1. F
2. F
3. T
4. T
5. T
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What is the principal-agent problem as applied to corporations?
What will be an ideal response?
According to Keynes, the classical model could not explain
A) a recession or depression. B) periods of rising unemployment. C) a long-term economic decline. D) periods of rising interest rates.
Which of the following topics is a macroeconomic subject?
A) a proposed merger between two companies B) the level of sales at a particular department store C) increases in the overall price level of a nation D) the pricing decision of a firm
A firm that is earning a positive profit in the short run and expects to continue doing so has an incentive to expand its scale of operation in the long run.
Answer the following statement true (T) or false (F)