If expectations are rational,
A. a predictable change in inflation can make the expected inflation rate deviate from the actual rate.
B. unemployment can exceed the full-employment rate even in the long run.
C. the difference between the actual inflation rate and the expected inflation rate must be a purely random number.
D. the inflation rate cannot be reduced without a period of high unemployment because the Phillips curve is downward sloping.
Answer: C
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How long does it take prices of securities to adjust so as to eliminate arbitrage profits?
A) seconds B) hours C) days D) months
In the long run, a monopolistically competitive firm will set price:
A. at the intersection of the marginal cost and demand curves. B. at the intersection of the average total cost and demand curves. C. higher than the competitive level, but lower than the monopoly price. D. higher than the marginal cost, but lower than average total cost.