Keynesians:
a. accept the countercyclical policy of doing nothing, that is, allowing market forces to work.
b. believe that the level of aggregate demand in the 1930s was sufficient to generate full employment.
c. accept the fact that policymakers should eliminate inflation first before focusing on unemployment.
d. focus on increasing aggregate demand in order to stimulate the economy.
e. were prepared for the events that beset our economy in the 1970s and 1980s.
d
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A decrease in the supply of sugar increases the price of sugar from $1.00 a packet to $1.25 a packet. The quantity decreases from 100 packets a day to 80 packets a day. The price elasticity of demand of sugar is ________
A) 0.75 B) 0.5 C) 1.0 D) 1.25
Under perfect capital mobility and a floating exchange rate system, expansionary fiscal policy leads to
a. an increase in income and the interest rate. b. no change in the interest rate and a fall in the trade balance. c. no change in the interest rate and a decrease in income. d. an increase in interest rates and a fall in the trade balance. e. no change in interest rates and the exchange rate.
Moral hazard occurs when contracts are written in such a way that
A) the interests of agent and principal converge. B) the interests of agent and principal diverge. C) agents will wish to maximize the principal's utility. D) production and risk-bearing efficiency are achieved.
Historically, as recessions have ended the unemployment rate declined
a. gradually to near zero. b. rapidly to near zero. c. gradually to a rate of about 5%-6%. d. rapidly to a rate of about 5%-6%.