The short-run Phillips curve is downward sloping because
A) the expected inflation rate is zero in the short run.
B) the economy always returns to full employment.
C) reducing the unemployment rate will reduce the inflation rate in the short run.
D) in the long run, the expected inflation rate equals the actual inflation rate.
E) the unemployment rate can be above or below the natural unemployment rate.
E
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Use the following graph, which shows the supply and demand curves for dollars in the pound/dollar market, to answer the next question,
Assume that D1 and S1 are the initial demand for and supply of dollars. Suppose that Britain's demand for dollars increases from D1 to D2. If the British government wishes to fix the exchange rate at the initial level, it should ________.
A. buy and add more to its dollar reserves B. encourage the British to import more U.S. products C. sell pounds in exchange for U.S. dollars D. sell some of its dollar reserves
The model of purchasing power parity is the only way to determine whether a country's currency is undervalued or overvalued
Indicate whether the statement is true or false
Consider a two-good production economy in which both goods are produced with fixed proportions production functions. Then, some efficient allocations will exhibit unemployment of some factor providing
a. the firms use the inputs in different proportions. b. the firms exhibit diminishing returns to scale. c. the firms exhibit increasing returns to scale. d. production can never be efficient if there are unemployed inputs.
The statement "as more of a good is consumed, the utility a person derives from each additional unit diminishes" is known as the:
a. water and diamond paradox. b. law of diminishing marginal utility. c. law of total utility. d. marginal-utility-to-price ratio equalization rule. e. law of diminishing demand.