An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase
B. increase; increase
C. decrease; decrease
D. increase; decrease
Answer: D
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Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion. If the president and Congress increased government purchases by $500 billion, what would be the result on the economy?
. What will be an ideal response?
Explain the differences between aggregate demand shocks and aggregate supply shocks
What will be an ideal response?
In the real business cycle theory, during a period when output is falling,
a. workers are voluntarily giving up their jobs. b. the quantity supplied of labor is falling. c. aggregate productivity must be falling. d. all of the above. e. none of the above.
Who makes decisions and trade-offs in the face of scarce resources?
A. Governments B. Individuals C. Businesses D. All of these are correct.