If the fluctuations in the economy's real growth rate from year to year are caused primarily by variations in the rate at which aggregate demand increases, then data would show
a. a cyclical relationship between inflation and unemployment.
b. a direct relationship between inflation and unemployment.
c. an inverse relationship between inflation and unemployment.
d. no relationship between inflation and unemployment.
c
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In the bank lending channel, an important reason for output increases in the short run after an expansionary monetary policy is that
A) the funds directly available for households and firms to spend will increase. B) prices will increase, making increased production more profitable for firms. C) the increase in government spending from an expansionary monetary policy increases output through the multiplier effect. D) the ability of banks to make loans will increase.
For most goods, purchases tend to rise with increases in buyers' incomes and to fall with decreases in buyers' incomes. Such goods are known as:
A) inferior goods. B) direct goods. C) normal goods. D) luxury goods.
Falling GDP leads to higher transfer payments and lower tax receipts.
Answer the following statement true (T) or false (F)
Assume a product has an inelastic demand. If the producer of the good raises the price of the product, that producer's total revenue will decrease.
a. true b. false