Of the recessions and expansions from 1950 to 1990, the common events were
a. reactions to war and oil prices
b. tax increases and tax cuts
c. changes in exports
d. Decreases in welfare spending
e. Increases and decreases in health care spending
A
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Suppose the nominal interest rate is 5% and the rate of inflation is 5%. The real interest rate is therefore
A) 0%. B) 1%. C) 5%. D) 6%.
According to the theory of rational expectations,
a. workers' experience tells them that government action to lower unemployment will not affect inflation. b. consumers and investors generally behave so that rationally formed government attempts to stimulate aggregate demand have their desired effects. c. policy goals can be achieved easily in the short run. d. workers' wage demands include anticipated inflation. e. expansionary monetary policy will lead to permanent interest rate declines.