Rational ignorance occurs when
a. voters find the cost of understanding a specific issue is greater than the expected benefit
b. legislation generates large benefits for a few people but imposes costs on many people
c. the preferences of the median voter dominates public choices
d. individuals or firms attempt to obtain favorable treatment from government officials
e. people make public decisions based on emotion rather than a rational analysis
A
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The short-run tradeoff between the unemployment rate and the inflation rate shown by the Phillips curve is represented in the AS-AD model by
A) rightward shifts of the aggregate supply curve. B) the downward-sloping aggregate demand curve. C) the upward-sloping aggregate supply curve. D) the vertical potential GDP line. E) leftward shifts of the aggregate supply curve.
For many years after the Great Depression, economists believed a central bank policy of increasing bank reserves in response to a recession would be
A) largely ineffective. B) the opposite of what the circumstances required. C) useless unless it also raised interest rates. D) useless unless it was accompanied by declining prices.