When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline
B. increase; raise; decline
C. decline; lower; expand
D. decline; raise; decline
Answer: C
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The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier. B. self-correcting property. C. short-run equilibrium property. D. long-run equilibrium property.
Surgical specialists earn more than general/family practice physicians. Which of the following statements is not true regarding this income differential?
a. Surgeons earn more because their practice costs, including medical malpractice insurance is higher. b. Surgeons earn more to compensate them for the extra years spent as residents. c. Physicians' incomes are determined to a large extent by supply and demand conditions with respect to each specialty. d. Surgeons will always earn more than general practitioners because they are smarter than general practitioners. e. Surgeons earn more than general practitioners because cutting into people is messy.
An In The News article in the text is titled "The Misery Index." If an increase in government regulations causes the AS curve to shift to the left, the misery index will
A. Decrease. B. Remain unchanged. C. Increase, decrease, or remain unchanged, depending on circumstances. D. Increase.
In the short run, a price increase in the goods and services market measured by the CPI will:
A. increase the purchasing power of money. B. improve producer profits and, thereby, induce suppliers to expand output. C. increase resource prices, lower profits, and lead to a decline in output. D. reduce the natural rate of unemployment.