To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
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Jane is currently developing a model to explain the national unemployment rate. This is an example of
A) a microeconomic topic. B) normative analysis. C) positive analysis. D) how people act in an irrational manner.
Which of the following statements concerning equilibrium in the long run is not true?
A. Most firms earn economic profits in the long run. B. The firm can vary its plant size in the long run. C. Economic profits are eliminated as new firms enter the industry in the long run. D. For firms in long-run equilibrium, P = MC = AC.
Which of the following best defines an expansion?
a. Real GDP is below its potential level. b. Real GDP is increasing. c. Unemployment is unusually high. d. Real GDP is decreasing. e. Real GDP exceeds its potential level.
If there is ongoing inflation in an economy, the value of real GDP will be greater than the value of nominal GDP
a. True b. False Indicate whether the statement is true or false