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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Refer to Figure 1A.1. Assume that the graph in this figure represents the demand and supply curves for walnuts. An advance in production technology which makes harvesting walnuts less time consuming would be represented by a shift from
A) Demand 1 to Demand 2. B) Demand 2 to Demand 1. C) Supply 1 to Supply 2. D) Supply 2 to Supply 1.
Use the data in the table above and suppose that labor is the only variable factor of production. When 122 dozen donuts are produced at Decent Donuts, the AVC curve
A) has a negative slope. B) has a positive slope. C) is at its minimum point. D) is at its maximum point.
As part of the "exchange rate effect of monetary policy," a lower money supply causes a __________ interest rate and thus __________ of the domestic currency
A) higher; appreciation B) higher; depreciation C) lower; appreciation D) lower; depreciation
Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). b. The GDP Price Index and net nonreserve-related international borrowing/lending remain the same. c. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative). d. The GDP Price Index rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). e. The GDP Price Index rises, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).