How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?
What will be an ideal response?
When the current unemployment rate is greater than the natural rate, there is slack in the labor market, so wage increases will be limited, as will firms' costs of production. So, the inflation rate will decrease.
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According to the misperceptions theory, an anticipated decline in the money supply leads to a shift of the AD curve ________ and a shift of the SRAS curve ________
A) down and to the left; downward B) down and to the left; upward C) up and to the right; downward D) up and to the right; upward
If an expansion proposal is accepted, allowing an otherwise idle (and useless) machine with a market value and book value of $2,000 to be utilized, should it be recorded as a cash outflow, and if so, how much?
What will be an ideal response?
The theory of an OCA sets out benefits to be derived from increased trade. A comparison of the U.S. currency area with that of the Eurozone reveals that:
A) interstate and inter-region trade is roughly equal in both areas. B) interstate and inter-region trade in the United States is smaller as a percent of gross state product than the same figure for Europe. C) interstate and inter-region trade in the United States is much larger as a percent of gross state product than the same figure for Europe. D) trade comparisons are largely irrelevant to the success of a currency union.
When a consumer's willingness to buy a good or service is influenced by the number of people who have purchased that good or service, this is called
A. an advertising gimmick. B. a network effect. C. a switching cost. D. an opportunity cost.