Analysis of the short-run Phillips curve suggests that policymakers who want to reduce unemployment in the short run should ______ aggregate demand at a cost of generating ______ inflation.
A. increase; higher
B. increase; lower
C. decrease; higher
D. decrease; lower
Ans: A. increase; higher
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Which of the following is correct when the perfectly competitive firm is producing its long-run equilibrium output level?
a. MR equals MC. b. AR equals ATC. c. P equals MC. d. All of these.
The misperceptions theory of the short-run aggregate supply curve says that if the price level is higher than people expected, then some firms believe that the relative price of what they produce has
a. decreased, so they increase production. b. decreased, so they decrease production. c. increased, so they increase production. d. increased, so they decrease production.
Which of the following is true?
A. A functional form misspecification can occur if the level of a variable is used when the logarithm is more appropriate. B. A functional form misspecification occurs only if a key variable is uncorrelated with the error term. C. A functional form misspecification does not lead to biasedness in the ordinary least squares estimators. D. A functional form misspecification does not lead to inconsistency in the ordinary least squares estimators.
The rule for the optimal use of any input says that
a. when MRP is less than price, it pays to expand resource use. b. when MRP is greater than price, it pays to expand resource use. c. when MRP equals price, resource use should be cut back. d. resources should be used only if MRP exceeds price.