Answer the following statements true (T) or false (F)
1. In real-business-cycle theory, real output can change without a change in the price level.
2. A coordination failure is said to occur when people do not reach a mutually beneficial equilibrium because they lack some way to jointly coordinate their actions to achieve it.
3. New classical economists see the economy as incapable of self-correction when disturbed and pushed away from its full-employment level of real output.
4. Rational expectations theory assumes that both product and resource markets are competitive and that wages and prices are flexible.
5. In rational expectations theory, a fully anticipated change in aggregate demand or in the price level results in no change in real output.
1. T
2. T
3. F
4. T
5. T
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Another benefit from entering a currency union that is not optimal would include:
A) the idea that economies interconnected in a currency union with increased trade also develop a symmetry of demand shocks. B) the reduction of interdependence and an increase in self-sufficiency. C) the cessation of disagreement over trade protection. D) the possibility of increasing the currency area.
Assume that the price elasticity of demand for a commodity is 0.20 . A 10 percent increase in the price of the commodity will be followed by a:
a. 20 percent increase in the quantity demanded. b. 2 percent decrease in the quantity demanded. c. 20 percent decrease in the quantity demanded. d. 0.2 percent decrease in the quantity demanded. e. 2 percent increase in the quantity demanded.