Suppose that the economy is in long-run equilibrium and the government decided to engage in unexpected contractionary policy by decreasing the money supply
If we assume rational expectations, which of the following statements is correct about the effect of contractionary policy in the long run?
A) The unemployment rate will decrease, real GDP will decrease and the price level will decrease.
B) The unemployment rate will increase, real GDP will increase and the price level will increase.
C) The unemployment rate will remain unchanged, real GDP will remain unchanged and the price level will decrease.
D) The unemployment rate will remain unchanged, real GDP will remain unchanged and the price level will increase.
C
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Two individuals are playing a trust game that has three rounds. In the first two rounds of the game, they have accumulated $1,000 as a team
In the third round, Player 1 is blindfolded and asked to decide whether he would let Player 2 guide him to a particular destination or opt out of the game. If he lets Player 2 guide him, Player 2 can either guide him to the correct destination or take him elsewhere. If he leads him to the correct destination, each of them will get half the accumulated money. On the other hand, if Player 2 can lead him astray, Player 2 will get 75% of the accumulated money and Player 1 will get 25%. If Player 1 opts out of the game, he will get 30% of the accumulated money and Player 2 will get 20%. a) What is the equilibrium outcome in this case? b) How will the equilibrium change if the players can impose a guilt penalty of 60% of the accumulated money on the defecting player?
Suppose that an ad valorem tax of 10% is imposed on consumers of butter. The bread market supply is Qs = 10 + P and the bread market demand is Qd = 220-P. What is the consumers' tax burden?
A) Consumers' tax burden is $3. B) Consumers' tax burden is $10 C) Consumers' tax burden is $5. D) Consumers' tax burden is $2.