The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output.
B. government policy.
C. decreasing inflation only.
D. increasing or decreasing inflation.
Answer: D
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________ monetary policy causes the real interest rate to ________
A) Expansionary; remain unchanged B) Contractionary; remain unchanged C) Expansionary; rise D) Contractionary; rise
If the government increases the income tax rate:
A. disposable income decreases. B. disposable income increases. C. disposable income remains unaffected. D. total income increases.
When moving along a market demand curve, the prices of related goods are assumed to be constant. With an aggregate demand curve,
A. the assumption is meaningless because we are using a market basket for all goods and services. B. the prices of related goods have an inverse relationship. C. all goods are assumed to have the same price. D. the same assumption holds true.
What is the difference between economic profit and normal profit?
What will be an ideal response?