Under the rational expectations hypothesis, which of the following is the most likely short-run effect of a move to expansionary monetary policy?
a. A higher general level of prices but no change in real output
b. A higher general level of prices and an expansion in real output
c. No change in the general level of prices and a reduction in real output
d. No change in either the general level of prices or real output
a
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Differentiate between perfectly elastic supply and perfectly inelastic supply. When the price of a good is $100, 50 units are supplied. When the price increases to $300, 250 units are supplied. Calculate the price elasticity of supply of the good
What will be an ideal response?
In the business cycle, what is the difference between the recovery phase and the expansion phase?
A) The expansion phase occurs in the rising portion of the business cycle, while the recovery phase occurs in the falling portion of the business cycle. B) The expansion phase occurs in the falling portion of the business cycle, while the recovery phase occurs in the rising portion of the business cycle. C) The expansion phase is the period when Real GDP increases beyond the recovery phase. D) The expansion phase must always come before the recovery phase.