Friedman and Phelps argued that it was dangerous to think of the short-run Phillips curve as a menu of options for policymakers to choose from. Explain the logic of their argument
Eventually the economy moves back to the natural rate of unemployment. Unemployment falls when inflation is greater than expected, but continued higher inflation eventually raises expected inflation reversing the decline in unemployment. Policy that shifts aggregate demand can only affect output and unemployment in the short run.
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Refer to Table 11.1. What is the value of the marginal propensity to consume?
A) 0.15 B) 0.6 C) 0.75 D) 0.9
When managers do not own very much of the net worth of the firm, then
A) there may be a principal-agent problem. B) the firm will usually have to raise most of its funds in financial markets. C) the firm will have to rely more on equity financing than debt financing. D) the firm will have to rely more on debt financing than equity financing.