An inflationary gap will exist when the full employment level of GDP is
A. equal to equilibrium GDP.
B. greater than equilibrium GDP.
C. less than equilibrium GDP.
D. greater than disposable income.
Answer: C
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Manny's Bar-n-Grill is next door to a franchised fast-food restaurant near a busy freeway exit. Essentially, the menus, food quality, atmosphere, and service are equal at the two restaurants. Nevertheless, the nationally franchised restaurant can attract more customers, even though its prices are higher. This situation
a. indicates that people are irrational because it never makes sense to pay a higher price when a product is cheaper elsewhere. b. is one in which the national franchise provides uninformed consumers with valuable information that reduces their risk of being unsatisfied with the purchase. c. reflects the greater elasticity of supply for food at Manny's Bar-n-Grill relative to the nationally franchised restaurant. d. is inconsistent with the basic postulates that underlie the economic way of thinking.
Under what conditions can a monopolist have potentially lower costs and possibly charge a lower price than would exist if the market were competitive?
a. when the monopolist operates on the inelastic portion of the demand curve b. when the monopolist is a profit maximizer rather than a revenue maximizer c. when substantial diseconomies of scale are present d. when substantial economies of scale are present
Why do economists make assumptions?
a. to create and thereby make economics more interesting b. to reflect and thereby make the past more understandable c. to complicate and thereby reflect the world more accurately d. to simplify and thereby make the world more understandable
Which of the following statements is true?
A. The calculated t statistic is valid and efficient in case of a spurious regression. B. If an explanatory variable or a dependent variable is integrated of the order one, the OLS estimators are asymptotically normally distributed. C. An error correction model can be used to study the short-run dynamics in the relationship between the dependent variable and the explanatory variables in a time series model. D. The Dickey-Fuller test can be used to test for heteroskedasticity in the error terms.