Rational expectations theory is based on the assumption that:
A. wages and prices are flexible upward but inflexible downward.
B. both product and resource markets are very competitive.
C. product markets are competitive, but resource markets are monopolistic.
D. both product and resource markets are monopolistic.
B. both product and resource markets are very competitive.
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General Motors estimates that U.S. demand for its newest product will be: Qus = 30,000 - 0.5P. Export demand will be Qex = 25,000 - 0.5P. The total market demand curve for this product will be a
A) straight line with a slope of -0.5. B) straight line with a slope of -1.0. C) kinked line with the kink at Q = 25,000. D) kinked line with the kink at P = 50,000. E) none of the above
The crowding-out effect of an expansionary fiscal policy is the result of government borrowing in the market which
A. increases interest rates and net investment spending in the economy. B. increases interest rates and decreases net investment spending. C. decreases interest rates and increases net investment spending. D. decreases interest rates and net investment spending.