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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Which of the following is TRUE regarding perfect competition? I. The firms are price takers. II. Marginal revenue equals the price of the product. III. Established firms have no advantage over new firms
A) I and II B) II and III C) I, II and III D) I only
When demand is elastic, a fall in price causes total revenue to rise because
A) the percentage increase in quantity demanded is less than the percentage fall in price. B) the demand curve shifts. C) when price falls, quantity sold increases so total revenue automatically rises. D) the increase in quantity sold is large enough to offset the lower price.
An economy operating its plant and equipment at full capacity implies a capacity utilization rate of
A. 40 percent. B. 70 percent. C. 85 percent. D. 100 percent.
When a nation's exports exceed its imports, it has a
A. exchange rate discrepancy. B. trade shortage. C. trade embargo. D. trade surplus.