Lucas and Sargent argue that the short-run trade-off between unemployment and inflation is caused by
A) workers and firms rapidly adjusting wages and prices in response to changes in expectations.
B) workers and firms using all the information available to predict inflation.
C) workers and firms being fooled by unexpected changes in monetary policy.
D) workers and firms using Fed policy to predict inflation.
C
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Refer to Figure 7-2. At the efficient equilibrium
A) economic surplus is zero. B) economic surplus is negative. C) economic surplus is minimized. D) economic surplus is maximized.
Which of the following is not an example of a differing taste for work?
a. Some people prefer physical labor and hate office work b. Some people become airline pilots while others are afraid to fly c. Winter temperatures are below zero on crab boats off Alaska d. Teenagers prefer jobs at Starbucks and Gap to those at fast-food restaurants e. Many people prefer the creative process even though earnings are low