Figure 11-1
In Figure 11-1, the economy is experiencing a(n)
a.
inflationary gap equal to EF.
b.
inflationary gap equal to ET.
c.
recessionary gap equal to ET.
d.
recessionary gap equal to FT.
c
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If desired spending exceeds output, then firms:
A) accumulate their inventories and cut production. B) deplete their inventories and cut production. C) deplete their inventories and increase production. D) accumulate their inventories and increase production.
Since business firms will undertake a project whose rate of return exceeds the present level of interest rates, when interest rates
A) rise planned investment rises, ceteris paribus. B) fall planned investment falls, ceteris paribus. C) rise planned investment does not change. D) rise planned investment falls, ceteris paribus.
Solving a moral hazard problem in a transaction would benefit
a. The seller only b. The buyer only c. Both the parties d. None of the parties
After 1970, the share of federal spending allocated to national defense:
a. declined sharply, while the share allocated to income security increased substantially. b. rose sharply, while the share allocated to income security declined substantially. c. was relatively constant, while the share allocated to income security declined modestly. d. declined modestly, while the share allocated to income security was relatively constant.