Why did many economists during the 1960s and 1970s believe that expansionary macroeconomic policy that resulted in inflation would reduce the rate of unemployment?
a. They failed to realize that the expansionary policy would stimulate aggregate demand.
b. They failed to realize that the expansionary policy would reduce real interest rates.
c. They failed to incorporate expectations into their analysis.
d. They thought that money growth would simply lead to a proportional increase in the price level.
C
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The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called
A) oligopoly. B) competitive analysis. C) strategic analysis. D) game theory.
The price elasticity of demand
A) depends on the units in which quantity is measured. B) depends on the units in which price is measured. C) depends on the units in which money is measured. D) is independent of the units in which quantity and price are measured.
The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. Assuming a fixed cost of entry, the incumbent will deter entry because
A) it is more profitable than accommodating entry. B) it increases consumer surplus. C) the potential entrant winds up with zero profit. D) the incumbent would earn zero profit if it accommodated entry.
The theory that changes in the exchange rate reflect only changes in the price levels of two countries is called
a. the floating exchange rate theory b. the fixed exchange rate theory c. the flexible exchange rate theory d. purchasing power parity e. the managed exchange rate theory