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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Unemployment
a. usually decreases whenever nominal GDP decreases. b. usually increases whenever real GDP decreases. c. usually decreases whenever nominal GDP increases. d. usually increases whenever the price level increases.
Due to the fact that Curly used his frequent flyer miles to fly to visit Moe, Curly told Moe that it didn't cost him anything to visit. Is Curly correct?
A. No, because Curly had to pay for earlier trips in order to earn the frequent flyer miles. B. Yes, because Curly's frequent flyer miles made the trip free. C. Yes, because Curly could stay at Moe's house for free. D. No, because Curly could have used his frequent flyer miles to go somewhere else instead.
Use the following cumulative investment schedule to answer the next question. Expected Rate of ReturnCumulative Amount of Investment (in billions)22%$11020150161801021052952380According to the cumulative investment table above,
A. $40 billion worth of investments have expected rates of return between 20% and 22%. B. $150 billion worth of investments have expected rates of return of 20% or lower. C. $260 billion worth of investments have expected rates of return higher than 20%. D. $150 billion worth of investments have expected rates of return exactly equal to 20%.
Define potential GDP. Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?
What will be an ideal response?