When the economy operates with a recessionary gap, the economy is self-correcting; when the economy operates with an inflationary gap, the economy is not self-correcting.
Indicate whether the statement is true or false.
Ans: False.
In both gaps the economy is self-correcting: given enough time the economy will adjust to economic shocks so that these shocks affect aggregate output in the short run but have no effect on aggregate output in the long run (that is, in the long run the economy will operate at its potential output level), provided the government does not intervene with activist policy.
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Explain how the market for gasoline would react to this price ceiling if the oil-producing nations increased production and drove the equilibrium price of gasoline to $2.50 a gallon. Would the U.S. gasoline market be effi-cient?
What will be an ideal response?
A useful theory must
A. apply to every conceivable situation. B. be broadly applicable. C. be agreed upon by all economists. D. not be able to be refined.
Sectoral shifts contribute to frictional unemployment
a. True b. False Indicate whether the statement is true or false
The production possibilities curve (PPC) illustrates economic growth by a(n)
A) bowed-out shape of the PPC. B) outward shift of the PPC. C) inward shift of the PPC. D) movement along the PPC.