Suppose real output falls in the aggregate economy. Which is correct?
A) A real business cycle theorist thinks that there was a negative shock to total factor productivity, and that the government should therefore increase expenditures.
B) A New Keynesian thinks that the output gap has fallen, and central bank's interest rate target should rise.
C) A real business cycle theorist thinks that total factor productivity has risen, and that the government should do nothing .
D) none of the above.
D
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"Allocative efficiency in the production of cherries means that consumers can eat all of the cherries they desire." Is this statement true or false?
What will be an ideal response?
In the figure above, D0 is the demand for labor curve. Imposing a minimum wage of $3 per hour will
A) have no effect on the market. B) result in unemployment. C) result in a labor shortage. D) immediately shift the demand curve to D1.
Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to a more expansionary monetary policy?
a. higher prices and no change in real output b. higher prices and expansion in real output c. no change in prices but an expansion in real output d. no change in either prices or real output
If the federal government has a budget surplus in a given year, the national debt will:
A. remain constant. B. increase. C. increase only if output is below potential output. D. decrease.