The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment.
B. exogenous spending.
C. recessionary gaps.
D. expansionary gaps.
Answer: D
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If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then
A) changes in the CPI are unrelated to the true rate of inflation. B) changes in the CPI understate the true rate of inflation. C) changes in the CPI overstate the true rate of inflation. D) changes in the CPI accurately reflect the true rate of inflation.
In pure competition:
a. the optimal price-output solution occurs at the point where marginal revenue is equal to price b. a firm's demand curve is represented by a horizontal line c. a firm is a price-taker since the products of every producer are perfect substitutes for the products of every other producer d. a and b only e. a, b, and c
The idea that inflation by itself reduces people's purchasing power is called
a. the inflation tax. b. menu costs. c. the inflation fallacy. d. shoeleather costs.
If the supply of money increases, what happens in the IS-LM framework?
A) The IS curve shifts right. B) The LM curve shifts right. C) The IS curve shifts left. D) The LM curve shifts left.