If the economy is experiencing an inflationary gap, an increase in the budget surplus
A. will increase the size of the inflationary gap.
B. will increase aggregate demand and will increase the price level.
C. will cause an increase in inflation and increase aggregate supply.
D. will reduce the size of the inflationary gap.
Answer: D
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When a foreign investor buys a bond issued in the United States,
A) the balance on the financial account increases. B) the balance of trade increases. C) the balance on the current account increases. D) the balance on the capital account increases.
What does it mean to say that workers and firms have rational expectations?
What will be an ideal response?
If a firm is able to charge each customer the maximum amount that he or she is willing to pay for its good,
a. the firm is engaging in rent-seeking behavior b. profits for the firm will be lower than for a single-price monopolist c. the firm will be violating federal law d. this is perfect price discrimination e. barriers to entry into the market will fall
Allocative efficiency means that among the points on the production possibility frontier, the point that is chosen is socially preferred. In this scenario, the measure of social benefit reflects:
a. what buyers are willing to pay for the product. b. a noneconomic benefit, such as improving people’s lives. c. lowering the cost of goods so that more people may purchase them. d. the social values of the corporation.