Which of the following categories accounted for the largest percentage of total federal government expenditures in recent years?
a. Income security.
b. National defense.
c. Education and health.
d. Interest on the national debt.
QUESTION 2According to the adaptive expectations theory, people form their expectations of the future on the basis of recent experiences.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3Hyperinflation refers to a situation in which:
a. prices are rising extremely rapidly.
b. prices are falling extremely rapidly.
c. the price level is extremely high.
d. the price level is extremely low.
QUESTION 4Which of the following categories accounted for the lowest percent of the total federal government expenditures in recent years?
a. Income security.
b. National defense.
c. Education and health.
d. Interest on the national debt.
QUESTION 5The long-run Phillips curve is a vertical line at the natural rate of unemployment.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6Which of the following correctly describes a wage-price spiral?
a. An increase in nominal wages causes inflation, and inflation causes workers to demand even higher wages in order to keep their real income constant. This cycle can repeat itself.
b. An increase in real wages due to growth in worker productivity causes inflation, which in turn increases worker productivity.
c. A decrease in prices causes workers to demand higher wages, which in turn puts additional downward pressure on prices.
d. None of the above.
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