Suppose a union successfully negotiates a wage rate for its members that is above the competitive wage rate, then
A) employment in the union sector will increase.
B) the union must find a way to make union workers more productive.
C) the union must also negotiate a fringe-benefit package that the membership will like.
D) the union must find a way to ration jobs among the excessive number of workers who wish to work at the negotiated wage.
Answer: D
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In 1981, the Fed
A) publicly announced an inflation reduction policy and created a recession. B) took no action so that the inflation rate skyrocketed. C) created an unexpected inflation reduction policy and created a recession. D) created an unexpected inflation reduction policy and created an expansion. E) publicly announced an inflation reduction policy and created an expansion. The figure above shows some Phillips curves for an economy.
If aggregate supply meets aggregate demand in the vertical part of the AS curve, which of the following is a true statement about expansionary policies?
A) Monetary policy will be more effective in increasing output. B) Fiscal policy will be more effective in increasing output. C) Fiscal and monetary policy will be equally effective in increasing output. D) Both monetary and fiscal policies will only cause prices to increase.