A fall in a foreign country's income will most likely cause:
A. an increase in U.S. exports, so the U.S. aggregate demand curve shifts left.
B. a reduction in U.S. exports, so the U.S. aggregate demand curve shifts right.
C. a reduction in U.S. exports, so the U.S. aggregate demand curve shifts left.
D. an increase in U.S. exports, so the U.S. aggregate demand curve shifts right.
Answer: C
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To fight inflation, the government may
A. decrease aggregate demand, which will also lead to lower unemployment rates. B. increase aggregate demand, which will also lead to lower unemployment rates. C. increase aggregate demand, which will also lead to higher unemployment rates. D. decrease aggregate demand, which will also lead to higher unemployment rates.
Assume that both the goods and the labor market are perfectly competitive. If at equilibrium, the marginal cost faced by a firm is $6 and the marginal product of the last unit of labor hired by the firm is 2 units, the market wage rate must be:
A) $3. B) $6. C) $12. D) $18.
A tax system with little deadweight loss and a small administrative burden would be described as
a. equitable. b. communistic. c. capitalistic. d. efficient.
The primary reason that short-lived shocks can have long-run effects is
A. the presence of propagation mechanisms. B. the nonneutrality of money. C. misperceptions by the public over the actual price level and the expected price level. D. the presence of rational expectations among the public.