The inflation rate has been constant for several years at 2 percent, and the unemployment rate has been stable at 5 percent over the same time period. Changes in government policy that cause the inflation rate to rise to 4 percent will
A. cause the unemployment rate to rise to 9 percent in the short run.
B. cause the unemployment rate to rise in the short run, but we cannot tell by how much.
C. have no effect on the unemployment rate.
D. cause the unemployment rate to fall in the short run.
Answer: D
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The extra cost associated with undertaking an activity is called
A) opportunity cost. B) foregone cost. C) marginal cost. D) net loss.
Suppose output is $35 billion, government purchases are $10 billion, desired consumption is $15 billion, and net exports are $4 billion. Then desired investment equals
A) $2 billion. B) $4 billion. C) $6 billion. D) $8 billion.
Which of the following could be written into an insurance contract in order to reduce the problem of moral hazard?
a. co-payments for repair services b. deductibles for repair services c. limitations on insurance coverage d. All of the above are correct.
The greater the degree of economic integration between markets in the home country and the base country:
A) the greater the volume of transactions and the greater the benefit to the home country of fixed exchange rates. B) the smaller the volume of transactions and the lesser the benefit to the home country of fixed exchange rates. C) the greater the volume of transactions and the greater the benefit to the home country of flexible exchange rates. D) the less important the volume of transactions and the greater the importance of ethnic similarities.