Starting from a long-run equilibrium, a reduction in potential output leads to ________ gap in the short run and to a___ rate of inflation in the long run.
A. a recessionary; higher
B. a recessionary; lower
C. an expansionary; higher
D. an expansionary; lower
Answer: C
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Because investment, consumption expenditure, and net exports are interest-sensitive components of expenditure, a ________ in the federal funds rate brings ________ in ________
A) fall; a decrease; aggregate supply B) rise; an increase; aggregate supply C) fall; an increase; aggregate demand D) rise; an increase; aggregate demand E) fall; a decrease; aggregate demand
Crowding out can best be defined as:
a. private investment increases growth rates and decreases deficits. b. restrictive monetary policy raises interest rates and decreases investment. c. government deficits increase interest rates and decrease investment. d. consumption spending increases interest rates and decreases investment.
If the required reserve ratio were decreased,
a. the money supply would tend to decrease, but the outstanding loans of banks would tend to increase. b. both the money supply and the outstanding loans of banks would tend to decrease. c. the money supply would tend to increase, but the outstanding loans of banks would tend to decrease. d. both the money supply and the outstanding loans of banks would tend to increase.
Ceteris paribus, with a fixed exchange rate, if people in Argentina decide to buy more Russian oil, this causes a market ________ of Russian currency and creates a balance-of-payments ________ for Russia.
A. shortage; surplus B. surplus; surplus C. shortage; deficit D. surplus; deficit