According to the cost-push theory, what is responsible for inflation?
(A) The economy is operating as though there was a war.
(B) Too much money is in circulation.
(C) Demand for goods and services exceeds existing supply.
(D) Producers raise prices to meet increased costs.
Ans: (D) Producers raise prices to meet increased costs.
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An earthquake destroys a good portion of the capital stock. How would you expect this to affect the capital—labor ratio in the long run? There would be
A) a rightward movement along the saving-per-worker curve and an increase in the capital—labor ratio. B) no change in the long-run capital—labor ratio. C) a downward shift in the saving-per-worker curve and a decrease in the capital—labor ratio. D) a leftward movement along the saving-per-worker curve and a decrease in the capital—labor ratio.
Firms hire labor at the point where the
A) nominal wage rate equals the marginal product of labor. B) real wage rate equals the marginal revenue product of labor. C) nominal wage rate equals the marginal revenue product of labor. D) real wage rate equals the marginal revenue product of capital.