If the Phillips Curve exists in reality, what dilemma does this create for fiscal and monetary policies? Explain.
What will be an ideal response?
The dilemma is that an expansionary fiscal and monetary policy aimed at reducing unemployment may cause inflation, and vice versa for policies aimed at reducing inflation. If there truly is a trade off, then successful elimination of unemployment cannot be accomplished without creation of inflation; likewise, stable prices occur only in the presence of some unemployment.
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Suppose that there are only two types of used cars, peaches and lemons and that used cars are pure experience goods. Peaches are worth $10,000, and lemons are worth $6,000. Three fourths of all used cars are peaches, and one fourth are lemons
In a market with no signals, for instance, a market without warranties, the average value of cars actually sold will be A) $6,000. B) $7,000. C) $9,000. D) $10,000.
In the short run, producers derive surplus from market exchange because
a. total revenue is greater than the minimum they would require to sell the good b. total revenue is equal to the minimum amount they would require to sell the good c. total revenue is less than the minimum amount they would require to sell the good d. marginal revenue equals average revenue e. they can rob consumers of most of their consumer surplus