Those who accept both the rational expectations hypothesis and the assumption of flexibility of wages and price would likely argue that
A) if policy makers are willing to accept a high inflation rate, they can reduce unemployment to a point below the natural rate.
B) policy makers can eliminate fluctuations in the level of business activity with careful planning of a widely publicized monetary policy.
C) saving and investment do not contribute to economic growth.
D) active policy making does not contribute to economic stability.
D
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Refer to the figure above. If there is downward wage rigidity in the market, what is the wage rate at which wages will be held, everything else remaining unchanged?
A) $25 B) $10 C) $30 D) $15
During the Winter Olympics in Vancouver, some residents rented rooms to visitors. This behavior
A) helped reduce the shortage of hotel rooms caused by the high demand during the Olympics. B) reduced the demand for tickets to the Olympics since many local residents left town while they rented out space in their homes. C) hurt the hotel market in Vancouver in the long run because new hotels that should have been built were not built for the Olympics. D) raised the demand for hotel rooms in Vancouver and should have been prevented by the city of Vancouver.
If MUx/Px > MUy/Py, the consumer can increase utility by buying more of good x, which will cause the MUx to rise
a. True b. False
Modern Keynesians believe that fiscal stimulus raises interest rates, which eliminates an AD excess.
Answer the following statement true (T) or false (F)