According to the new classical theory, if the public correctly anticipates a government policy to increase aggregate demand, then
A) there will be a short-run tradeoff between inflation and unemployment, but there will not be a long-run tradeoff.
B) there will be a long-run tradeoff between inflation and unemployment, but there will not be a short-run tradeoff.
C) there will be both a long-run and a short-run tradeoff between inflation and unemployment.
D) there will be neither a long-run nor a short-run tradeoff between inflation and unemployment.
E) there may be a short-run tradeoff between inflation and unemployment, but one cannot say for certain whether there will be a long-run tradeoff.
D
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An open-market sale of Treasury bills by the Fed not only reduces the money supply but also
A. Lowers T-bill prices and raises interest rates. B. Drives up T-bill prices and pushes down interest rates. C. Lowers T-bill prices and pushes down interest rates D. None of these.
If a country is currently producing inside its production possibilities curve
A) it can increase the production of both goods by putting unemployed resources to work. B) it can increase the production of one of the goods only if it reduces the production of the other good. C) it is experiencing efficient production of one good but not the other. D) None of the above are correct.
People often choose to specialize and trade because:
A. it will allow them to enjoy more goods than they can create on their own. B. they can consume a bundle of goods on their production possibilities frontier. C. it always allows them to produce at a point beyond their own production possibilities frontier. D. they can take advantage of another nation’s poor choices.
Today the federal government collects nearly
A. $4 trillion a year in tax revenues. B. $500 billion a year in tax revenues. C. $1 billion a year in tax revenues. D. $1 trillion a year in tax revenues.