In the view of rational expectations theory:
A. People make economic forecasts that are based on insider-outsider relationships and self-fulfilling prophecies
B. People form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur
C. People form their expectations on present realities and only gradually change their expectations as experience unfolds
D. The economy does not respond quickly to changes in prices, which causes a mis-allocation of economic resources
B. People form beliefs about future economic outcomes that accurately reflect the likelihood that those outcomes will occur
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When the economy is in long-run equilibrium, the price level adjusts so as to equate which two values with one another?
A) total planned real expenditures and total planned production B) government spending and tax revenues C) the inflation rate and the unemployment rate D) import and export spending
In the New Keynesian model,
A) money is neutral. B) money is fixed. C) monetary policy has a real impact. D) prices are countercyclical.
The expansion path for a constant-returns-to-scale production function
a. is a straight line through the origin with a slope greater than 1 if w > v. b. is a straight line through the origin with a slope greater than 1 if w < v. c. is a straight line through the origin, though its slope cannot be determined by w and v alone. d. has a positive slope but is not necessarily a straight line.
Peter Piper picks a peck of pickled peppers using 10 units of labor and two pepper-picking machines. The last worker hired picked 100 peppers, and the last machine added 1,000 peppers. If labor can be hired at $5 a pepper picker and machines cost $5,000 . what advice do you have for Peter Piper?