Answer the following statements true (T) or false (F)
1. If expectations are always met, then firms would never contribute to any of the short-run fluctuations in employment and output that are observed in real-world economies
2. If the prices of goods and services were flexible, then the economy could always produce at its optimal capacity.
3. An unexpected negative demand shock would lead to a decrease in inventories
4. An unexpected negative demand shock would lead to a decrease in real GDP.
5. Sticky prices could be the result of firms being afraid of price wars.
1. TRUE
2. TRUE
3. FALSE
4. TRUE
5. TRUE
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Banks hold 100% of their checking deposits as vault cash to ensure that bank runs do not occur
Indicate whether the statement is true or false
Assume the auto market is initially in equilibrium with imports from Japan taking up a significant share of the market. Now assume a quota on imports of Japanese cars is established
What will occur at the initial equilibrium price to signal market participants regarding the change that has taken place? A) A surplus is created by an increase in supply. B) A surplus is created by a decrease in demand. C) A shortage is created by an increase in demand. D) A shortage is created by a decrease in supply.
To correct the budget deficit for inflation, we should
a. multiply the budget deficit by the price deflator for GDP. b. subtract interest payments from tax revenues. c. divide the budget deficit by nominal GDP. d. divide the budget deficit by the consumer price index.
Efficiency wages will raise the quantity of labor supplied to the market
a. True b. False Indicate whether the statement is true or false