If actual output exceeds potential output, the economy:
A. is experiencing a recessionary gap.
B. may be in a long-run equilibrium but is not in a short-run equilibrium.
C. is experiencing an inflationary gap.
D. is in neither a short-run nor long-run equilibrium.
Answer: C
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A guarded barbed wire fence separates East and West Bovinia. Soccer players are paid twice as much in West Bovinia as in East Bovinia. This is an example of
a. inelastic supply b. a temporary resource price differential c. a permanent resource price differential d. diminishing marginal revenue product e. economic rent
We currently run a negative trade balance in ______ and a ______ trade balance in services.
Fill in the blank(s) with the appropriate word(s).
Real business cycle theory suggests that changes in
A. technology and resources affect productivity, and thus the long-run growth of aggregate supply. B. monetary policy is the single most important cause of macroeconomic instability. C. the velocity of money is gradual and predictable and thus able to accommodate the long-run changes in nominal GDP. D. investment spending will have a direct and significant effect on aggregate demand.
The wealth effect, the interest rate effect, and the foreign trade effect are three complementary explanations for the ______ of the aggregate demand curve.
a. leftward shift b. negative slope c. rightward shift d. positive slope