Each of the Following Conditions Will Tend to Reduce the Sacrifice

question 49

Multiple Choice

Each of the following conditions will tend to reduce the sacrifice ratio except when:

• A) workers and firms set wages and prices based on rational expectations.
• B) policymakers make credible commitments to policy changes.
• C) announcements of policy changes are made before workers and firms have formed expectations.
• D) the concept of hysteresis accurately describes the impact of history on the natural rate of unemployment.

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Definitions:

Marginal Utility

The extra pleasure or benefit received from using an additional unit of a product or service.

Consumer Surplus

The financial gap between the potential spending by consumers on a product or service versus their actual spending.

Marginal Utility

The added enjoyment or advantage gained by using one more unit of a good or service.

Marginal Utility

The additional satisfaction or benefit received by consuming one more unit of a good or service.