The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B
B. recessionary; C
C. recessionary; A
D. expansionary; A
Answer: C
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_____ refers to the ways in which a change in the price of a good alters the effective buying power of one's income
a. Wealth effect b. Alternative effect c. Income effect d. Substitution effect
This graph shows unit elastic demand because the distance between Q1 and Q2 is ______ the distance between P1 and P2.
a. greater than
b. less than
c. equal to
d. irrelevant to
The primary responsibility of the Federal Open Market Committee (FOMC) is:
A. handling the Fed's collection of checks and adjusting legal reserves among banks. B. issuing currency and acting as the fiscal agent for the federal government. C. supervising bank operations to make sure they follow regulations and monitoring banks for fraud. D. setting the Fed's monetary policy and directing the buying and selling of government securities.
Most economists agree that the immediate determinant of the volume of output and employment is the:
A. composition of consumer spending. B. ratio of public goods to private goods production. C. level of total spending. D. size of the labor force.