Which of the following is not correct?
a. In the short run, policymakers face a tradeoff between inflation and unemployment.
b. Events that shift the long-run Phillips curve right shift the long-run aggregate supply curve left.
c. Unemployment can be changed only by the use of government policy.
d. The decrease in output associated with reducing inflation is less if the policy change is announced ahead of time and is credible.
c
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The natural rate hypothesis asserts that
A) changes in the unemployment rate from changes in the inflation rate are temporary. B) changes in the unemployment rate are natural and long-lasting. C) when prices change, the inflation rate changes temporarily and then returns to its natural rate. D) changes in the natural unemployment rate are only temporary. E) price changes occur at a natural rate, near a 6 percent average inflation rate.
Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Compare the conditions in the market when the price is $50 and when the price is $35. Which of the following describes how the market differs at these prices?
A) The difference between quantity supplied and quantity demanded is greater at $50 than at $35. B) At each price there is a surplus; firms will lower the equilibrium price in order to eliminate the surplus. C) At each price the supply of tote bags exceeds that demand for tote bags. D) At each price there is a surplus; the surplus is greater at $35 than at $50.
In the case of purely flexible exchange rates, a decrease in domestic real income, with constant prices and domestic credit, will lead to
A) an increase in international reserves. B) the depreciation of the domestic currency. C) the appreciation of the domestic currency. D) no change in the value of the domestic currency.
According to the Net Present Value (NPV) rule, managers choose to invest if
a. The NPV of the project is less than zero b. The NPV of the project is greater than zero c. The NPV of the project is equal to zero d. The NPV of the project is equal to the cost of capital