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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In the short-run Keynesian model where the marginal propensity to consume is 0.75, to offset a recessionary gap resulting from a $1 billion decrease in autonomous consumption, transfers must be:
A. decreased by $1 billion. B. increased by $1.33 billion. C. decreased by $1.33 billion. D. increased by $1 billion.
Which of the following is NOT an entity of the Federal Reserve System?
A) Federal Reserve Banks B) the Comptroller of the Currency C) the Board of Governors D) the Federal Open Market Committee
Rent-seeking behavior results in
a. increased economic activity by promoting efficiency. b. lower economic activity by diverting resource to less-productive uses. c. a more equitable distribution of income and wealth. d. lower prices throughout the economy. e. greater income and wealth in the private sector.
An income tax increase in the Virgin Islands will cause the Islands'
a. consumption curve to shift downward b. consumption curve to shift upward c. investment curve to shift upward d. investment curve to shift downward e. economy to move to the right along its current investment curve