Economist A. P. Lerner's idea that equality of income maximizes society's welfare is based on the assumption that
a. individuals have dissimilar utilities, but private property ownership distorts individual utilities so that no income distribution exists that reflects true utilities
b. individuals are egalitarian
c. individuals have identical utility functions
d. individuals have identical skills
e. individuals would voluntarily choose income equality
C
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According to rational expectations theory,
A) increasing the money supply to reduce unemployment will always be successful. B) decreasing the money supply to reduce unemployment will usually be successful. C) increasing the money supply to reduce unemployment will not be successful because of an offsetting decrease in prices. D) increasing the money supply to reduce unemployment will not be successful because of an offsetting increase in prices.
Suppose the Federal Reserve makes monetary policy more expansionary. In the long run
a. both inflation and the unemployment rate are higher than they were prior to the change in policy. b. inflation is higher and the unemployment rate is the same as it was prior to the change in policy. c. inflation is lower and the unemployment rate is lower than it was prior to the change in policy. d. inflation is lower and unemployment is the same as it was prior to the change in policy.