An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase
B. increase; increase
C. decrease; decrease
D. increase; decrease
Answer: D
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An expansionary gap in the short-run results in: a. lower resource prices in the long run. b. unemployment in the long run
c. a recessionary gap in the long run. d. cost-push inflation in the long run. e. demand-pull inflation in the long run.
The demand curve for a foreign currency
a. slopes upward b. slopes downward c. is horizontal d. has a slope of 45 degrees e. is vertical
The sticky-price theory implies that
a. the short-run aggregate-supply curve is upward-sloping. b. an unexpected fall in the price level induces firms to reduce the quantity of goods and services they produce. c. menu costs influence the speed of adjustment of prices. d. All of the above are correct.
If the percentage change in the quantity demanded is negative while the percentage change in income is positive, the good is an inferior good.
Answer the following statement true (T) or false (F)