Suppose Okun's law holds and a one percentage point increase in the unemployment rate reduces real output by 2% of full-employment output
The expectations-augmented Phillips curve is given by
? = ?e - 2.5 (u - 0.04).
Suppose ? = 0.08 and ?e = 0.03.
(a) What is the natural rate of unemployment?
(b) What is the actual rate of unemployment?
(c) How much is actual GDP compared with full-employment GDP?
(a) 0.04
(b) 0.02
(c) 4% higher
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Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service. The value of the service to each of them is $50 and it costs $80 to hire a housecleaner. Should they hire a housecleaner?
A) No, because each will wait for the other to hire the housecleaner. B) Yes, but only if a housecleaner will accept $50 so that each can take turns to pay the housecleaner. C) No, because it will be difficult for them to agree on which housecleaning service to use. D) Yes, if each contributes $50, then each stands to gain a consumer surplus.
In the Keynesian model, the I = S equation, where I is intended investment and S is actual saving, describes the economy in macroequilibrium
Indicate whether the statement is true or false
An unexpected shift to a more expansionary monetary policy will generally
a. stimulate aggregate demand and real output as soon as the policy is instituted. b. exert its primary impact on aggregate demand and real output 6 to 15 months in the future. c. cause inflation in the short run, but expand real output in the long run. d. increase real interest rates in the short run.
This graph represents the cost and revenue curves of a firm in a perfectly competitive market.
According to the graph shown, if a firm is producing at Q2:
A. it is producing at an efficient scale. B. average total costs are minimized. C. profits are being maximized. D. All of these are true.