Mainstream Macroeconomics Has Embraced the

question 95

Multiple Choice

Mainstream macroeconomics has embraced the

• A) rational expectations view that stabilization policy is totally ineffective.
• B) monetarist view that the Fed should increase the money supply at a fixed annual rate.
• C) rational expectations view that expectations can shift the aggregate demand and aggregate supply curves.
• D) monetarist view that an increase in government spending crowds out an equal amount of investment spending.

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Definitions:

Marginal Revenue Product

The additional revenue generated by employing one more unit of a factor of production, such as labor or capital.

Additional Revenue

The extra or incremental income received from selling one more unit of a product or service.

Input Hired

Resources or factors of production, such as labor, raw materials, and capital, employed in the creation of goods and services.

Complements in Production

Goods that are produced together in the production process; an increase in the production of one leads to an increase in the production of the other.