An increase in the output gap causes the demand for real balances
A) to rise and the interest rate to fall.
B) to fall and the interest rate to rise.
C) and the interest rate to fall.
D) and the interest rate to rise.
D
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The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A B. recessionary; C C. recessionary; B D. expansionary; A
Fiscal policy includes all of the following EXCEPT
A) policies that influence the rate of growth of the quantity of money in circulation. B) changing taxes. C) changing government spending. D) policies that influence aggregate demand.
If the inflation rate is lower than expected, real income is redistributed from borrowers to lenders
a. True b. False
Which of the following firms is most likely to shut down?
a. TicToc, Inc. has a total revenue of $500,000 and variable costs of $450,000 b. LWT, Inc. has a total revenue of $3 million and variable costs of $3.2 million. c. Sparkle, Inc. has a total revenue of $4 million and variable costs of $3.7 million. d. Motif, Inc has a total revenue of $6 million and variable costs of $6 million.