Some economists argue that there is no such thing as a short-run Phillips curve. Who are these economists and what is their argument?
The theory of rational expectations disavows a short-run trade-off between inflation and unemployment. Economists holding this theory maintain that households and businesses recognize the full impact of aggregate demand increases. They know that more AD will lead to higher price levels and so they negotiate higher wages whenever the government increases AD. As a result, increases in AD are offset by decreases in AS. Job creation cancels out, but the combination of higher AD and lower AS increases the price level. Hence, the Phillips curve is vertical at the natural rate of unemployment, even in the short run.
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Most income tax revenues are collected by _____
a. the federal government b. state governments c. county governments d. city governments
Compared to a reduction in tax rates, a one-time tax rebate will exert
a. a weaker impact on aggregate demand because the increase in the incentive to earn and impact on long-term income will be smaller for the temporary tax cut. b. a stronger impact on aggregate demand because both the increase in the incentive to earn and impact on long-term income will be larger for the temporary tax cut. c. an identical impact on aggregate demand because the size of the budget deficit will be the same regardless of whether the tax cut is temporary or permanent. d. an identical impact on aggregate demand because the incentive effects of a tax cut will be the same regardless of whether it is temporary or permanent.