The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B
B. recessionary; C
C. recessionary; A
D. expansionary; A
Answer: C
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The net present value of a project is calculated as
A) the future value of all cash inflows minus the present value of all outflows. B) the sum of all cash inflows minus the sum of all cash outflows. C) the present value of all cash inflows minus the present value of all cash outflows. D) None of the above
An increase in the Consumer Price Index indicates that
a. the real income of households is increasing. b. the purchasing power of the dollar is increasing. c. the cost of buying the typical bundle of goods consumed by households is increasing. d. the real net worth of consumers is increasing.
If velocity remains constant, which of the following examples would cause the price level to be stable?
a. Money supply increases by 7 percent; real GDP increases by 8 percent. b. Money supply increases by 8 percent; real GDP increases by 11 percent. c. Money supply increases by 5 percent; real GDP increases by 3 percent. d. Money supply increases by 12 percent; real GDP increases by 12 percent.
Assume the price of product Y (the quantity of which is plotted on the vertical axis) is initially $15 and the price of X (the quantity of which is plotted on the horizontal axis) is initially $3. Assume money income is initially $60. If the prices of Y
and X now increase to $30 and $6 respectively and money income increases to $120, then the budget line will: A. shift rightward and become steeper. B. shift rightward and become flatter. C. shift rightward, but its slope will not change. D. be unchanged.