Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Chapter 27, Problem 14SQ
To determine
The impact of expansionary
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Rational expectations believe that
a. the government must change government spending and taxes during inflation and deflation gaps
b. people will form the most accurate possible expectations about the future that they can, using all the available information available to them
c. the federal reserve must buy and sell government securities during inflation and deflation gaps
d. the economy will never self-correct
Now consider an economy in which the government lowers its spending. In the long run, the result would be _____________ in the price level and _____________ in real output.
an increase; an increase
a decrease; no change
a decrease; a decrease
None of the listed options is correct.
no change; a decrease
Suppose an economy experiences a positive supply shock. What is the short-run effect on output and the price level?
Group of answer choices
Output rises and the price level falls.
Output and the price level both rise.
Output falls and the price level rises.
Output and the price level both fall.
Chapter 27 Solutions
Economics For Today
Ch. 27.3 - Prob. 1YTECh. 27.6 - Prob. 1YTECh. 27 - Prob. 1SQPCh. 27 - Prob. 2SQPCh. 27 - Prob. 3SQPCh. 27 - Prob. 4SQPCh. 27 - Prob. 5SQPCh. 27 - Prob. 6SQPCh. 27 - Prob. 7SQPCh. 27 - Prob. 8SQP
Ch. 27 - Prob. 9SQPCh. 27 - Prob. 1SQCh. 27 - Prob. 2SQCh. 27 - Prob. 3SQCh. 27 - Prob. 4SQCh. 27 - Prob. 5SQCh. 27 - Prob. 6SQCh. 27 - Prob. 7SQCh. 27 - Prob. 8SQCh. 27 - Prob. 9SQCh. 27 - Prob. 10SQCh. 27 - Prob. 11SQCh. 27 - Prob. 12SQCh. 27 - Prob. 13SQCh. 27 - Prob. 14SQCh. 27 - Prob. 15SQCh. 27 - Prob. 16SQCh. 27 - Prob. 17SQCh. 27 - Prob. 18SQCh. 27 - Prob. 19SQCh. 27 - Prob. 20SQ
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- Suppose the economy is operating at a point where output is less than the natural level of output. Which of the following statements is correct given this information? Select one: a. Workers will revise upwards price expectations. b. The inflation level will be higher next period than this period. c. The unemployment rate is less than the natural unemployment rate. d. The inflation level is less than the expected inflation level. e. None of the above.arrow_forwardConsider the Efficiency Wage story. Suppose we had several periods of 0 inflation. Then if we had a decrease in Aggregate Demand that caused a decrease in the Aggregate Price level, we would see which of the following in the short run? Select one of the following multiple choice answers and explain why you chose that answer. a. higher inflation and higher unemployment. b. lower inflation (which would be deflation given our premise) and higher unemployment. c. higher inflation and lower unemployment. d. lower inflation (which would be deflation given our premise) and lower unemployment. e. none of the above.arrow_forwardConsider the Efficiency Wage story. Suppose we had several periods of 0 inflation. Then if we had a decrease in Aggregate Demand that caused a decrease in the Aggregate Price level, we should see which of the following in the short run? Explain your answer. a. inflation and higher employment b. lower inflation (which would be deflation given our premise) and higher employment c. inflation and lower employment d. lower inflation (which would be deflation given our premise) and lower employment e. none of the abovearrow_forward
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