In the long run, money demand and money supply determine
a. the price level and the real interest rate.
b. the price level but not the real interest rate.
c. the real interest rate but not the price level.
d. neither the price level nor the real interest rate.
b
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Refer to the above figure. Suppose the natural rate of unemployment is 5 percent. If the government tried to reduce unemployment to 4 percent and keep it there, it must
A) raise unemployment benefits. B) accept a permanent inflation rate of 1 percent. C) generate higher and higher inflation rates or else people will adjust their behavior and the unemployment rate will return to 5 percent. D) use contractionary fiscal and expansionary monetary policy.
Suppose that the price of a coffee mug is $2. Lee's marginal cost of producing coffee mugs $0.50 for the first mug, Tammy's marginal cost of producing coffee mugs is $1 for the second mug, Stan's marginal cost of producing coffee mugs is $1.50 for the third mug, Joy's marginal cost of producing coffee mugs is $2 for the fourth mug, and Jody's marginal cost of producing coffee mugs is $3 for the fifth mug. In equilibrium, what is the producer surplus from producing coffee mugs?
A. $0 B. $2 C. $3 D. $6
When the government pays part of my university education, it is
A. internalizing an external cost. B. using direct regulation to discourage an external cost. C. using taxes to discourage an external cost. D. subsidizing an external benefit.
An increase in the MPC, reduces the multiplier.
Answer the following statement true (T) or false (F)