According to classical economists, when aggregate demand decreases
A. unemployment is reduced, the price level increases, and equilibrium real GDP is reached.
B. unemployment temporarily increases, the price level increases, and equilibrium real GDP is reached.
C. unemployment temporarily increases, the price level decreases, and equilibrium real GDP is reached.
D. unemployment is reduced, the price level decreases, and equilibrium real GDP is reached.
Answer: C
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Dana's utility of wealth is 65 units at $3,000, 80 units at $5,000, and 95 units at $9,000. Starting from zero wealth, he must choose between options A and B. Option A gives him $5,000 for sure
Option B gives him $3,000 with probability 0.5 or $9,000 with probability 0.5. Dana will A) choose option A. B) choose option B. C) be indifferent between option A and option B because they have the same risk. D) be indifferent between option A and option B because they have the same expected utility.
A flexible exchange rate regime
A) does not describe the regime follow by the European Central Banks. B) keeps the exchange rate fixed but lets the price of gold fluctuate C) allows a currency to float D) none of these choices.
Which of the following is not a prediction of the theory on baseball caps and cheating?
A) More people will wear baseball caps on test days than on lecture days. B) More people will wear baseball caps for multiple choice tests than for essay tests. C) More people will wear baseball caps when students sit close to each other in class and are taking a test than when students sit far apart from each other and are taking a test. D) b and c E) none of the above
Suppose Chris is offered the following gamble: with probability 0.1 he will win $90, with probability 0.4 he will win $50, and with probability 0.5 he will lose $60. The expected value of this gamble is found by solving:
A. 0.1 × $90 + 0.4 × $50 B. 0.1 × $90 + 0.4 × $50 - 0.5 × $60 C. ($90 + $50 - $60)/3 D. 0.1 × ($90 - $60) + 0.4 × ($50 - $60)