The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier.
B. self-correcting property.
C. short-run equilibrium property.
D. long-run equilibrium property.
Answer: B
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An individual plans to borrow a sum of $10,000 for one year. The nominal interest charged on the borrowed sum is 6%
a. If he takes the loan, what will be the interest amount and the total amount that he would have to pay at the end of the year? b. If the rate of inflation in the economy is 10%, then is it a good idea for him to take the loan? Why or why not?
Gordon characterizes Modigliani as a prominent activist yet several implications of his life cycle hypothesis support the non-activists. One of these implications is
A) transitory increases in income associated with the business cycle are not expected to last a lifetime so current consumption is relatively stable. B) permanent increases in income associated with the business cycle are not expected to last a lifetime so current consumption is relatively stable. C) transitory increases in income associated with the business cycle are not expected to last a lifetime so current consumption is relatively unstable. D) transitory increases in income associated with the business cycle are to last a lifetime so current consumption is relatively stable.
If an economist wanted to understand why people don't buy life insurance, he would want to use the deductive approach.
Answer the following statement true (T) or false (F)
What is the domestic price of a TV in a closed economy?
A. $100 B. $137.50 C. $125 D. $75