Recessions occur because of:
A. real adverse shocks to the economy.
B. shocks to technology.
C. difficulties in coordinating economic affairs.
D. All of these.
Answer: D
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Comparing the short-run Phillips curve and the long-run Phillips curve, we see that there is
A) no relationship between the two curves. B) no tradeoff in either curve. C) a tradeoff in both curves. D) only a long-run tradeoff between inflation and unemployment but not a short-run tradeoff. E) only a short-run tradeoff between inflation and unemployment but not a long-run tradeoff.
Unemployment increases when
A) an inflationary gap is created. B) potential GDP increases. C) the government decreases its expenditure on goods and services. D) aggregate demand increases. E) aggregate supply increases.
If bond investors think they lack enough details to evaluate the likelihood of defaults on certain bonds, this will result in higher:
A) expected return B) liquidity C) information costs D) expected inflation
Over the inelastic range of a demand curve, there is
A) a positive relationship between a given percentage change in price and a change in total revenues. B) a negative relationship between a given percentage change in price and a change in total revenues. C) an increase in total revenues regardless of an increase or decrease in price. D) no relationship between changes in price and changes in total revenues.