Controversies between Keynesian, monetarist, and supply-side theories focus on the
A. Usefulness of aggregate demand and supply to analyze adjustment of the macro equilibrium.
B. Existence or nonexistence of the aggregate supply curve.
C. Importance of international balances to the economy.
D. Shape and sensitivity of aggregate demand and aggregate supply curves.
Answer: D
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Some economists believe that financing deficit spending by increasing taxes will lead to a lower level of national consumption and a higher level of national savings than deficit spending. The reason is
A) that people do not realize that taxes have increased also. B) the interest rate on the debt will increase. C) people will forgo private consumption now as society substitutes government goods for private goods. D) people believe that they can consume the government provided goods and have future generations pay the bill.
The argument advanced by Milton Friedman for adopting a monetary growth rule is that
A) active monetary policy potentially destabilizes the economy. B) a constant rate of growth in the money supply would eliminate the booms and recessions that make up the business cycle. C) the growth rate of M1 has been unstable. D) the Fed can control the money supply, but not the level of interest rates.
In long-run equilibrium in a monopolistically competitive industry, a firm will
A) always earn an economic profit. B) produce an output rate at which P = MC. C) produce at a point to the left of the minimum point on its average total cost curve. D) have a perfectly elastic demand curve.
The short-run Phillips curve differs from the long-run Phillips curve with regard to the way:
A. unemployment is treated. B. wages are treated. C. prices are treated. D. expected inflation is treated.