The so-called ratchet effect refers to the characteristic in the economy where product prices, wages, and per-unit production cost are flexible when:
A. AD decreases but not when AD increases
B. AD increases but not when AD decreases
C. AS increases but not when AS decreases
D. AD shifts but not when AS shifts
B. AD increases but not when AD decreases
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The theory of "rational expectations" is most closely associated with __________ economists
A) Classical B) Keynesian C) Monetarist D) New Classical
If the government lowered the capital gains tax, what would be the effect in the loanable funds market? (Assume the government does not run a budget deficit.)
a. Both the supply and demand for funds would increase, lowering the interest rate and raising investment spending. b. The supply of funds would decrease, raising the interest rate and lowering investment spending. c. The supply of funds would decrease, lowering both the interest rate and investment spending. d. The supply of funds would increase, lowering both the interest rate and investment spending. e. The supply of funds would increase, lowering the interest rate and raising investment spending.