Which of the following is true of dummy variables?
A. A dummy variable always takes a value less than 1.
B. A dummy variable always takes a value higher than 1.
C. A dummy variable takes a value of 0 or 1.
D. A dummy variable takes a value of 1 or 10.
Answer: C
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The rational expectations theory indicates that expansionary policy will:
a. stimulate real output in the long run but not in the short run. b. expand real output and employment if the public quickly anticipates the effects of the expansionary policy. c. equalize real and nominal interest rates during lengthy periods of inflation. d. fail to increase employment because individuals will anticipate it and take actions that will offset its impact.
Suppose that a firm in an industry subject to diminishing returns to scale is initially in long run equilibrium. Which of the following will not be part of the industry adjustment process to a permanent increase in demand? a. Some firms will temporarily make economic profits
b. Some new firms will enter. c. The long run equilibrium price will be higher than the initial equilibrium price. d. All of the above will be consequences.
Before about 1975
a. any federal deficits were at least 5 percent of GDP. b. most federal deficits were less than 2 percent of GDP. c. the federal government never ran deficits. d. the federal government always ran a surplus. e. any federal deficits were at least 7 percent of GDP.
Fiscal federalism refers to
a. passing money from one level of government to another. b. leaving indirect taxes to the states. c. keeping property taxes low. d. making all levels of government operate on a "pay as you go" basis.