When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline
B. increase; raise; decline
C. decline; lower; expand
D. decline; raise; decline
Answer: C
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A war destroys much of the capital stock in the country of Omega. As a result, holding other factors constant, the real wage in Omega will ________ and employment in Omega will ________.
A. increase; decrease B. decrease; decrease C. increase; not change D. increase; increase
Which of the following statements is false?
A) The Dow Jones Industrial Average went down by 40 percent during the decade of the 1930s. B) Based on data from the period between 1926 and 2004, the probability of having a positive return on an investment in the stocks contained in the Dow Jones Industrial Average would have been 97.1 percent if the stocks had been held for 10 years. C) When reading the stock market page of a newspaper, if the column marked "Div." is blank, it means that the company does not currently pay out dividends. D) A stock that yields 4 percent is better than a stock that yields 5 percent, all else being the same.
Why would making a permanent change in a monetary aggregate have an effect on exchange rates in a nation?
a. Permanent rates are mostly set by short-run fluctuations in the rate of interest caused by monetary instability. b. A permanent change is never quite as permanent as policy makers claim-people form expectations on past performance rather than declarations. c. The central bank is always aware of the effect on exchange rates as it formulates policy, so it is very careful to make small permanent changes that have no effect on exchange rates. d. Traders form expectations of future exchange rates based on the anticipated long-run effects of monetary operations
Compared to Western Europe, over the last three decades unemployment in United States has been ________ and the rate of job creation has been ________.
A. higher; slower B. higher; faster C. lower; faster D. lower; slower