To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
You might also like to view...
Which could be sources of funding for a government that wants to increase government expenditures?
A. both taxes and borrowing B. borrowing only C. neither taxes nor borrowing D. taxes only
Which of the following statements is true?
A. Improvements in production technology do not affect the shape or position of the production-possibility curve. B. Biased growth leads to a proportionate shift in the production-possibility curve. C. Increases in a country's endowments of land, labor, and capital will lead to long-run economic growth. D. Improvements in the technology used in production can lead to increases in current output levels but are not a source of long-run economic growth.
Nonprice rationing devices are required
A. because the price system does not allocate resources efficiently. B. so that prices will go back to equilibrium. C. when there are price floors but not when there are price ceilings. D. to allocate goods when there is a price ceiling.
Which of the following is NOT likely to occur when a bank fails?
A) Everyone that deposits money in the bank loses all or a portion of their money, unless the country has a functioning deposit insurance system. B) The loss of savings (or the feared loss of savings) causes households to cut back on consumption, which spreads the recessionary effect wider through the country. C) Unaffected banks may stop making loans as they take a cautious approach, slowing or stopping new investment. D) Layoffs occur and the economy falls deeper into a downward spiraling inflation. E) Other banks make too many loans to make up for the loans not made by the failed bank, kicking off a cycle of stimulation and inflation.