The "information barrier" that is the root cause of business cycles in the Lucas model is that
A) workers observe the prices of what they personally buy, but cannot observe the general price level.
B) workers do not know when changes in the price level mean changes in the prices of the goods they buy.
C) firms do not know when changes in the price of the good they sell matches changes in the price level and thus their marginal cost.
D) firms do not know if a change in the price level will have any effect on their marginal cost and thus their willingness to supply.
C
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The figure above gives your budget line for magazine and CDs per month. Given that your income equals $60 per month, what is your real income in terms of CDs?
A) 3 CDs B) 5 CDs C) 6 CDs D) $60/month
To decide whether or not the slope coefficient is large or small,
A) you should analyze the economic importance of a given increase in X. B) the slope coefficient must be larger than one. C) the slope coefficient must be statistically significant. D) you should change the scale of the X variable if the coefficient appears to be too small.