Refer to the diagram. Rational expectations theory says that a fully anticipated shift in aggregate demand from AD 1 to AD 2 will:
A. move the economy from a to b to c.
B. move the economy directly from a to c.
C. move the economy from a to a new equilibrium at b.
D. shift the AS curve to the right.
B. move the economy directly from a to c.
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Give an example of a frictionally unemployed person
What will be an ideal response?
Which of the following describes how output changes in the short run? Because of specialization and the division of labor, as more workers are hired
A) output will first decrease at an increasing rate, then increase at a decreasing rate. B) the marginal product of labor will first be negative and then will be positive. C) output will first increase at an increasing rate, then output will increase at a decreasing rate. D) the marginal product of labor will first decrease, then increase at a decreasing rate.
Which of the following would encourage an outward shift of the PPF?
(a) Outward emigration of entrepreneurs; (b) A decrease in demand as the economy slips into recession; (c) The level of capital investment falls; (d) Inward migration of skilled workers.
An increase in the tax rate on interest income
a. raises the amount earned on savings. Saving will rise if the income effect of the increase in the tax rate is larger than the substitution effect. b. raises the amount earned on savings. Saving will rise if the income effect of the increase in the tax rate is smaller than the substitution effect. c. reduces the amount earned on savings. Saving will fall if the income effect of the increase in the tax rate is larger than the substitution effect. d. reduces the amount earned on savings. Saving will fall if the income effect of the increase in the tax rate is smaller than the substitution effect.