The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending.
B. recessionary gaps.
C. expansionary gaps.
D. unemployment.
Answer: B
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What is the difference between a market equilibrium and a competitive market equilibrium?
What will be an ideal response?
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
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What will be an ideal response?
Economists spend much of their time
A) describing how choices are made and analyzing the results of those choices. B) arguing that optimal decisions are rarely made at the margin. C) using normative analysis to develop economic models. D) telling businesses what goods and services to produce and how to produce them.