In the long run, the Phillips curve will be ________ at the natural rate of unemployment if the long-run aggregate supply curve is vertical at potential output.
A. positively sloped
B. vertical
C. negatively sloped
D. horizontal
Answer: B
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When firms leave a perfectly competitive market, then, other things remaining unchanged:
a. the market supply will decrease but the market price will rise. b. both the market supply and the market price will fall. c. both the market demand and the price will increase. d. the market demand will decrease but the market price will rise. e. both the market demand and the market supply will decrease.
Suppose initially the federal budget is balanced. The economy then enters a period of expansion. What is likely to happen to the federal budget?
A. It will show a surplus. B. It will show a deficit. C. It will remain balanced. D. It will automatically stabilize.
For this question, assume that expectations of P and A are correct. Now suppose that there is a 4% increase in A. Given this information, which of the following will occur?
A) The PS relation will shift up by 4%. B) The WS relation will shift up by less than 4%. C) The WS relation will shift down by 4%. D) The PS relation will shift down by 4%.
Of the four effects on interest rates from an increase in the money supply, the one that works in the opposite direction of the other three is the
A) liquidity effect. B) income effect. C) price level effect. D) expected inflation effect.