If firms and workers have rational expectations, including knowledge of the policy being used by the Federal Reserve, the short-run Phillips curve will be
A) vertical.
B) flatter in the long run than it is in the short run.
C) negatively sloped.
D) positively sloped.
A
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Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of:
A. the proper application of the Cost-Benefit Principle. B. inconsistent reasoning; saving $20 is saving $20. C. inconsistent reasoning because prices are sunk costs. D. rational choice because saving 40% is better than saving 4%.
The dominant school of economic thought from the 1930s into the 1960s was
A. the classical school. B. the Keynesians. C. the monetarists. D. supply-side economists.