Which of the following is an important assumption in the short-run macro model?
a. Government spending depends on income.
b. Output does not change.
c. Firms do not maintain inventories.
d. Investment depends on income.
e. Prices do not change.
E
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Suppose labor supply declined. Would this affect the aggregate demand curve or the aggregate supply curve? What would be the effect on output and the price level?
What will be an ideal response?
One reason why an economy may not smoothly adjust to a macroeconomic shock is that
A) prices are flexible in the long run. B) prices are sticky in the short run. C) wages are sticky in the long run. D) prices and wages are sticky in the long run.
When a tariff is applied to a good exported by a foreign monopoly (with no home producer), the price net of the tariff received by the seller is _________.
a. lower than under free trade b. higher than under free trade c. the same as under free trade d. so high that no sales are possible
Logrolling is when a politician ______.
a. votes for an issue in exchange for someone else’s vote on another issue b. misleadingly portrays opponent as more radical than they actually are c. puts aside the public good under pressure from special interest groups d. claims to support an issue but votes against it