Empirical evidence suggests that money is not always neutral, which is consistent with
a. an equilibrium business-cycle model.
b. a price-misperceptions model.
c. a real business-cycle model.
d. a wage-imperfections model.
Answer: b. a price-misperceptions model.
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When an economy produces at its allocatively efficient production point
A) scarcity is not a problem. B) resources are not limited. C) a society can increase the production of all goods. D) a society can increase the production of one good only by decreasing the production of some other good that is valued more highly.
If there is initially an
A) excess demand for money, the interest rate will fall, and the supply of money it will rise. B) excess supply of money, the interest rate will fall, and if there is initially an excess demand, it will rise. C) excess supply of money, the interest rate will rise, and if there is initially an excess demand, it will fall. D) excess supply of money, the interest rate will fall, and if there is also an excess demand, it will fall rapidly. E) excess supply of money, the interest rate will rise, and if there is also an excess demand, it will rise rapidly.
One of the primary functions of markets could be labeled
a. stimulation. b. coordination. c. planification. d. decentralization.
An economy with a trade deficit must also have:
A. positive net capital outflows. B. a budget surplus. C. positive net capital inflows. D. a trade deficit.