Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to expansionary monetary policy?
a. A higher general level of prices but no change in real output
b. A higher general level of prices and an expansion in real output
c. No change in the general level of prices and a reduction in real output
d. No change in either the general level of prices or real output
a
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Why is there NO persistent unemployment in the classical model?
A) Unionization creates job security for workers. B) The wage level adjusts to eliminate unemployment. C) The interest rate adjusts to eliminate unemployment. D) The rate of economic growth is always high enough to allow those who want to work at current wages to find jobs.
If the Fed increases the inflation rate in the short run before people's expected inflation changes, what occurs? What happens in the long run?
What will be an ideal response?
Which of the following is a characteristic of perfect competition?
a. substantial barriers to entry b. differentiated products c. few sellers d. none of the above
Discuss the Coasian reasoning with an example