When there is a deflationary gap _______ GDP is greater than _______ GDP.
Fill in the blank(s) with the appropriate word(s).
full employment; equilibrium
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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
Which one of the following factors contributed to the decline in real output during the Great Depression?
a. deflation, which changed the terms of long-term contracts and discouraged long-term exchange b. inflation, which reduced the value of the dollar and eroded the savings of the elderly c. stable monetary policy, which caused business decision makers to lose confidence in the Fed's ability to fine-tune the economy d. establishment of the Federal Deposit Insurance Corporation
One "design principle" that makes informal, community-based solutions to public goods and common resource problems more effective is:
A. the government setting clear rules for use. B. clear distinctions between who is and is not allowed to access the resource. C. individual pledges to self-monitor their actions. D. All of these are important to the effectiveness of community-based solutions.
Exhibit 2-2 Production possibilities curve
In Exhibit 2-2, the slope of the production possibilities curve indicates that the opportunity cost of:
A. coffee is constant. B. coffee is increasing. C. coffee is decreasing. D. corn is increasing.