When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand
B. increase; raise; decline
C. decline; lower; decline
D. decline; raise; decline
Answer: B
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In the above figure, Jill's opportunity cost of producing 1 gallon of bottled water is ________ of soda
A) 4 gallons B) 1/4 of a gallon C) 1 gallon D) 1/2 of a gallon E) 2 gallons
If there is an improvement in technology that affects only Aggregate Supply and a nation's wealth falls due to a sagging stock market, then:
a. Price index rises, and real GDP falls. b. Price index rises, and the change in real GDP is uncertain. c. Price index falls, and real GDP rises. d. Price index falls, and the change in real GDP is uncertain. e. Price index falls, and real GDP falls.
Several studies in the 1990s concluded that the consumer price index overstated inflation by about
a. 3 percentage points per year, and that number of percentage points likely still applies now. b. 3 percentage points per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 3 percentage points. c. 1 percentage point per year, and that number of percentage points likely still applies now. d. 1 percentage point per year, but recent improvements to the CPI probably have reduced the overstatement of inflation to something less than 1 percentage point
Which of the following occurs when the economy experiences inflation?
A. The free-rider problem. B. Micro instability. C. Government failure. D. Macro instability.