According to rational expectations theory:
a. a large reduction in unemployment can be achieved with a relatively small increase in inflation
b. people are not easily fooled by changes in government fiscal policy.
c. inflation rates that rise 3 percentage points each year will keep unemployment below its natural rate for a sustained period of time.
d. the Phillips curve will slope downward to the right, if people correctly anticipate the inflation rate.
b
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If the percentage change in quantity demanded is greater than the percentage change in price, we would say that over this range, demand is:
A) elastic. B) unit elastic. C) inelastic. D) perfectly inelastic.
The shares of GDP taken in taxes by federal, state & local governments
a. have risen steadily in the past 40 years to about 22 percent. b. have dropped steadily in the past 40 years to about 6 or 7 percent. c. grew substantially until the early 1970s and have leveled off at about 10 to 11 percent. d. fell steadily until the early 1970s and has risen steadily since then.
Suppose that a $4 per unit tax is imposed on the sellers of DVDs. The effect of the tax will be to
a. shift the supply curve up by exactly $4 and the price paid by buyers will remain unchanged. b. shift the supply curve up by exactly $4 and the price paid by buyers will rise by less than $4. c. shift the supply curve up by exactly $4 and the price received by sellers will rise by exactly $4. d. shift the demand curve down by exactly $4 and the price paid by buyers will fall by exactly $4.
Which of the following is not a result of a reduction in the federal budget deficit?
A) a lower real interest rate B) an appreciation of the currency C) a rise in exports D) a fall in the price of foreign inputs