The theory of rational expectations implies which of the following?
a) unemployment and the rate of inflation are directly related
b) an increase in the money supply will have no effect on price level
c) attempts to decrease unemployment below the natural rate lead to depression
d) attempts to decrease unemployment through government policy will be thwarted by people's reactions
e) government policies work only if the money supply increases by 10 percent
Ans: d) attempts to decrease unemployment through government policy will be thwarted by people's reactions
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If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:
a. the opportunity cost of producing bicycles in the United States is higher than in Japan. b. Japan has a comparative advantage in the production of bicycles. c. the United States has an absolute advantage in the production of rice. d. total output will be highest if the United States specializes in rice and Japan specializes in bicycles. e. total output will be highest if Japan specializes in rice and the United States specializes in bicycles.
If a firm experiences economies of scale, then, as output increases,
a. short-run total costs decline b. long-run total costs rises proportionately more than output c. short-run marginal cost must decline d. long-run total cost rises proportionately less than output e. demand increases
Real wages more accurately reflect the payment to labor because they are adjusted for the effects of inflation
a. True b. False Indicate whether the statement is true or false