The inflation rate has been constant for several years at 4 percent, and the unemployment rate has been stable at 6 percent over the same time period. Changes in government policy that cause the inflation rate to rise to 6 percent will
A) have no effect on the unemployment rate.
B) cause the unemployment rate to fall in the short run.
C) cause the unemployment rate to rise to 9 percent in the short run.
D) cause the unemployment rate to rise in the short run, but we cannot tell by how much.
Ans: B) cause the unemployment rate to fall in the short run.
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The accelerator theory can explain the paradox that both interest rates and investment rise and fall in concert during the business cycle if
A) the effect of changes in Y effect on In dominate the effect of interest rates on investment. B) the LM curve is constant. C) the IS curve is constant. D) the effect of changes in interest rates on In dominate the effect of changes in Y on In.
The primary difference between a monopolistically competitive firm and a monopoly is:
A. the ability for competition to enter the market in the long run. B. the ability for competition to enter the market in the short run. C. only the monopolistically competitive firm is a price taker. D. only the monopolist can set his price equal to demand.
Libertarians believe that
a. it is more important to evaluate the process by which economic outcomes are produced than the outcomes themselves. b. government should attempt to redistribute income from the rich to the poor when the gap between rich and poor is more than 20%. c. equality of income is more important than equality of opportunity. d. it is more important to evaluate economic outcomes first and then the process that produced them.
The economic decisions of central planners often are wrong because they have little understanding of
a. local economic conditions b. bureaucracies c. Karl Marx's theories d. democracy