The flaw of the Real Business Cycle model is that it
A) assumes away output fluctuations.
B) assumes complete wage rigidity.
C) assumes unrealistic fooling of workers.
D) requires procyclical wage movements and continuous labor market equilibrium.
D
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
If the price of butter increases, the demand for margarine
A) will be unchanged. B) will shift outward. C) will shift inward. D) will kink into an S-curve.
Which of the following is true of opportunism?
a. Opportunism increases the possibility that a party can gain by disregarding the contract. b. Opportunism lowers the cost of negotiation between parties when the contract is incomplete or unclear. c. Opportunism allows parties to maximize the value of their transactions. d. Opportunism leads to mutually beneficial outcomes.
Why did many economists during the 1960s and 1970s believe that expansionary macroeconomic policy that resulted in inflation would reduce the rate of unemployment?
a. They failed to realize that the expansionary policy would stimulate aggregate demand. b. They failed to realize that the expansionary policy would reduce real interest rates. c. They failed to incorporate expectations into their analysis. d. They thought that money growth would simply lead to a proportional increase in the price level.