One of the basic assumptions of rational expectations theory is that:
A. People can anticipate the future effects of policy changes and the actions they take may offset the effects of economic policy
B. People are not able to assess the future effects of policy changes, so government can use economic policy effectively
C. Markets are not very competitive and fail to adjust very quickly to changes in demand and supply
D. People expect government to solve the major unemployment and inflation problems facing the nation and behave accordingly
A. People can anticipate the future effects of policy changes and the actions they take may offset the effects of economic policy
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The aggregate demand curve or schedule shows the relationship between the total demand for output and the ________.
A. income level B. price level C. interest rate D. real GDP
Matt, a star basketball player, is looking to join a new NBA team. The Bulls are offering him $24 million for one year. The Heat is offering him $10 million this year and $7.0 million in each of the next two years. The market interest rate is 5 percent. What is the present value of the offer from The Heat in millions (rounded to the nearest one hundred thousand dollars)?
A. $22.5 million B. $23.0 million C. $24.0 million D. $25.2 million
The usefulness of money in commercial societies comes from the fact that
A) money is backed by gold. B) most people will change their behavior at least a little in response to money incentives. C) most people will do anything at all for money. D) most people would rather spend money than save it. E) the quantity of money can easily be expanded or contracted.
We can infer that the government is following a restrictive fiscal policy when
A) the actual deficit falls. B) the natural employment deficit falls. C) the actual deficit rises. D) the natural employment deficit rises.