The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment.
B. exogenous spending.
C. recessionary gaps.
D. expansionary gaps.
Answer: D
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What would be the effect on the labor supply curve of a higher income tax rate?
Evidence from the Great Recession suggests that the crowding out effect:
A. was minimal at that time. B. had a very detrimental effect on private savings. C. can be quite large in times of recession, and is reinforced with recent research from 2008. D. may hold, although the evidence is somewhat contradictory.
If the government reduced the minimum wage and pursued expansionary monetary policy, then in the long run
a. both the unemployment rate and the inflation rate would be higher. b. both the unemployment rate and the inflation rate would be lower. c. the unemployment rate would be higher and the inflation rate would be lower. d. the unemployment rate would be lower and the inflation rate would be higher.
We would expect which of the following to occur when the central bank pursues expansionary monetary policy?
A) an increase in bond prices and an increase in the interest rate (i) B) a reduction in bond prices and an increase in i C) an increase in bond prices and a reduction in i D) a reduction in bond prices and a reduction in i E) none of the above