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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Yvonne takes out a fixed-interest-rate loan and then inflation turns out to be higher than she had expected it to be. The real interest rate she pays is
a. higher than she had expected, and the real value of the loan is higher than she had expected. b. higher than she had expected, and the real value of the loan is lower than she had expected. c. lower than she had expected, and the real value of the loan is higher than she had expected. d. lower then she had expected, and the real value of the loan is lower than she had expected.
The classical dichotomy and monetary neutrality are represented graphically by
a. an upward-sloping long-run aggregate-supply curve. b. a vertical long-run aggregate-supply curve. c. an upward-sloping short-run aggregate-curve. d. a downward-sloping aggregate-demand curve.
If an economy is operating at short-run equilibrium below the full-employment level of real GDP, the self-correction model result is that:
A. unemployment increases. B. unemployment falls. C. cyclical unemployment increases. D. frictional and structural unemployment increase.
When two or more divisions mark up prices in excess of marginal cost:
A. double marginalization occurs. B. second-degree price discrimination occurs. C. two-part pricing occurs. D. None of the answers are correct.