The rational expectations hypothesis is based on all the following assumptions EXCEPT
A. use of knowledge of effects of past policy actions.
B. understanding of how the economy operates.
C. understanding that prices are sticky.
D. use of judgment about effects of future policy actions.
Answer: C
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Rent seeking
a. often entails large opportunity costs. b. prevents waste of resources. c. often promotes fairness in distribution of resources. d. cannot occur in a planned economy.
Horizontal equity can be determined by comparing the
A. Marginal tax rate of the taxpayer with the highest nominal income to the marginal tax rates of taxpayers with lower nominal incomes. B. Marginal tax rates for two taxpayers with the same nominal incomes. C. Effective tax rate of the taxpayer with the highest nominal income to the effective tax rates of taxpayers with lower nominal incomes. D. Effective tax rates for two taxpayers with the same nominal incomes.
When the federal reserve sells bonds as a part of a contractionary monetary policy, there is:
A. A decrease in the money supply and a decrease in interest rate B. A decrease in the money supply and an increase in interest rate C. An increase in the money supply and a decrease in interest rate
Firms should hire additional units of a resource as long as the:
A. marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced. B. marginal product of the resource is less than the price of the resource. C. price of the output produced is positive. D. marginal revenue product of the resource exceeds the cost of an additional unit of the resource.