The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output.
B. government policy.
C. decreasing inflation only.
D. increasing or decreasing inflation.
Answer: D
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If a new cash deposit creates excess reserves of $5,000 and the required reserve ratio is 10 percent, the banking system can increase the money supply by a maximum of
a. $50,000. b. $500. c. $5,000. d. $4,500.
A decrease in foreign demand for U.S. exports will ____ the demand for U.S. dollars and cause the U.S. dollar to ____ in value
a. increase; appreciate b. increase; depreciate c. decrease; appreciate d. decrease; depreciate
What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?
a. There would be an increase in the amount of loanable funds borrowed. b. There would be a reduction in the amount of loanable funds borrowed. c. There would be no change in the amount of loanable funds borrowed. d. The change in loanable funds is uncertain.
A bank has $100 million of checkable deposits, $6 million of required reserves, and $2 million of excess reserves. What is the required reserve ratio?
A. 2 percent B. 3 percent C. 6 percent D. 12 percent