According to rational expectations theory, discretionary monetary and fiscal policy will be ineffective primarily because of the:
A. Successes of macroeconomic policy makers
B. Inability of policy makers to time decisions properly
C. Reaction of the public to the expected effects of policy changes
D. Slow impact of policy to stimulate changes in real output and employment
C. Reaction of the public to the expected effects of policy changes
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In the classical model the interest rate is determined by
a. real investment demand. b. real saving. c. government spending. d. tax revenues. e. all of the above.
In recent years, the Federal Reserve has:
A. paid closer attention to M1 than M2 in setting monetary targets. B. relied more on changes in the discount rate than open-market operations in establishing monetary policy. C. has increased M2 at a fixed annual rate, regardless of the health of the economy. D. taken an activist, pragmatic approach to monetary policy, paying close attention to interest rates.
If there is a decrease in demand for a product in a purely competitive industry, it results in an industry contraction that will end when the product price is:
A. Greater than its marginal cost B. Equal to its marginal cost C. Less than its marginal cost D. Greater than its average cost
Al B. Core works at a Fresh Fish Market. The market sells fresh fish from 9 a.m. until 7 p.m. every day. The store does not sell day-old fish, so all unsold fish are thrown away at 7 p.m. each day. If Al has lots of fresh fish left at the end of the day that cost him $300 to acquire, what should Al do? a. Lower the price of the remaining fish, even if he can't recover his $300
b. Lower the price of the remaining fish, but under no circumstances should the price fall below $300 for the remaining fish. c. Throw the fish away even if he could sell some of them at a discounted price. d. Starting tomorrow, lower the price on all fish so they will all be sold by mid-day.