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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Structural unemployment includes people who become unemployed from
A) changes in the business cycle. B) technological changes. C) going back to school. D) changes in the seasons. E) normal changes in the labor force.
The marginal rate of technical substitution always equals
A) the slope of the total product curve. B) the ratio of the marginal products of inputs. C) the change in output due to a change in the amount of one input. D) the distance between two isoquants.
A monopolist will operate in the short run if which of the following is above average variable cost?
a. Marginal cost. b. Marginal revenue. c. Price. d. All of these.
Some economists believe that creeping inflation cannot be accepted because a gradual increase in prices leads to an ever-rising rate of inflation. Other economists argue that in order to achieve economic growth, some moderate price increases are necessary. Contrast and evaluate these two points of view.
What will be an ideal response?