Why might an equation that has always predicted accurately in the past prove to be wrong following a policy change?
a. Because the policy may change people's behavior and invalidate the equation.
b. Because people's expectations may cease to be rational.
c. Because uncertainty means that every equation contains some degree of error.
d. Because the policy change may affect economic variables not contained in the equation.
a. Because the policy may change people's behavior and invalidate the equation.
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Explain the difference between discretionary and automatic fiscal policy. Provide examples of each
What will be an ideal response?
In the European Monetary Union, the supply of euros
A) is managed by the individual central banks of the member countries. B) is managed by the European Central Bank. C) is determined by market forces. D) automatically varied in response to short-run fluctuations in the exchange rates of the member nations.
In the above figure, the break-even output and price is
A) $9 and 14. B) $13 and 14. C) $11 and 16. D) $10 and 17.
Roxanne and Eileen live in an apartment building with a laundry room in the basement. Roxanne does her laundry at home, spending $4 and 5 hours per week. Eileen sends her laundry out, spending $20 and 15 minutes per week transporting the laundry. On the basis of the information given, which one of the following must be true?
a. Roxanne earns more labor income than Eileen. b. Eileen earns more total income than Roxanne. c. Roxanne enjoys doing laundry; Eileen does not. d. Eileen has less laundry than Roxanne. e. Eileen and Roxanne attach different utilities to time spent doing laundry.