If the time for an economy to self-correct is shorter than the active policy lags, then:
a. active policy should be strengthened
b. active policy is likely to destabilize the economy.
c. time is required to accumulate evidence that the economy is performing below its potential.
d. the aggregate demand curve shifts more rapidly than the short-run aggregate supply curve.
e. active policy will work better than passive policy.
b
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If a firm finds that the wage rate (W) is less than the value of marginal product (VMP), then to maximize its profit the firm should hire
A) less labor, which will increase the VMP. B) more labor, which will decrease the VMP. C) no more or less labor, because profits are greatest when W < VMP. D) more labor, because hiring more labor will increase both W and VMP until they are equal.
If the Fed is using policy to combat inflation, what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?
A) The demand for the dollar will increase and the foreign exchange value of the dollar will rise. B) The demand for the dollar will decrease and the foreign exchange value of the dollar will fall. C) The demand for the dollar will decrease and the foreign exchange value of the dollar will rise. D) The demand for the dollar will increase and the foreign exchange value of the dollar will fall.