The theory of rational expectations concludes that
A. by reacting to the expected effects of a stabilization policy, the public will tend to negate the impact of that policy.
B. the public's expectations as to the effects of economic policies will tend to reinforce the effectiveness of those policies.
C. the public's expectations can influence the outcome of fiscal policy, but not of monetary policy.
D. the public's expectations can influence the outcome of monetary policy, but not of fiscal policy.
A. by reacting to the expected effects of a stabilization policy, the public will tend to negate the impact of that policy.
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Refer to the above figure. Suppose the economy is operating at point A. There is a recessionary gap of ________, which can be closed by ________
A) $3 trillion; increasing government spending by $1 trillion B) $1 trillion; expansionary fiscal policy that shifts the short-run aggregate supply curve through point C C) $2 trillion; expansionary fiscal policy that generates another $2 trillion in total spending D) $2 trillion; an increase in government spending of $14 trillion
An indication that Insurance companies anticipate adverse selection is
a. they require a deductible b. they do not classify clients into different risk types according to their claim history c. they do not classify clients into different risk types according to pre-existing conditions d. they do not require a co-payment
GDP is a measure of the total output of an economy
a. True b. False Indicate whether the statement is true or false
The law of comparative advantages explains why
A. advanced nations will not trade with less-developed countries. B. an advanced nation will not trade with other countries. C. less-developed countries only trade among themselves. D. nations trade with each other, regardless of their relative levels of economic development. E. nations erect trade barriers.