Which of the following is false?
a. Rational expectations theory suggests that government economic policies designed to alter aggregate demand to meet macroeconomic goals are of very limited effectiveness, because when policy targets become public, people will alter their own behavior from what it would otherwise have been, and in so doing, they largely negate the intended impact of policy changes.
b. If changes in inflation surprise people, they will have little effect on unemployment or real output in the short run.
c. An unanticipated increase in AD as a result of an expansionary monetary policy stimulates real output and employment in the short run, but an anticipated increase in AD does not.
d. Unanticipated increases in AD expands output and employment in the short run, but only increases the price level in the long run.
b
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Suppose the velocity of money is not fixed, but stable at about two percent growth per year
How could the quantity theory of money be modified to include a stable growth rate of the velocity of money? In this modified quantity theory of money with velocity growing at two percent per year, what would the growth rate of the other variables in the theory need to be to cause inflation?
An increase in the availability of health insurance could be expected to cause the average price of health care to increase
Indicate whether the statement is true or false
Explain the difference between nominal GDP and real GDP. Which is more important when using GDP as a measure of production? Why?
What will be an ideal response?
Productivity is measured as output per unit of productive input
a. True b. False Indicate whether the statement is true or false