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...
The reason why firms in perfect competition end up with no economic profit in the long run is that
a. they do not have the knowledge to run the firm correctly b. in the long run, firms lose competitiveness c. in the long run, costs rise to equal prices d. if they make an economic profit, new firms will enter the industry, driving the price down, and this continues until economic profit is zero e. in the long run, the losses of firms who leave the industry equals the economic profit of those who remain
Suppose Country X is one of the largest exporters of coffee in the world. A recent massive cyclone has destroyed much of the coffee crop in Country X and has considerably lowered its exports. Which of the following is a likely consequence of this disaster?
A. The price of coffee in the international market will decline. B. The size of Country X's trade triangle will increase. C. The price of Country X's imports relative to the price of its exports will increase unambiguously. D. Country X's terms of trade will improve.
Free trade is ________, because it ________ the size of the pie available to the economy.
A. inefficient; decreases B. efficient; increases C. inefficient; increases D. efficient; decreases
The effect on business of the crowding-out effect in the short run would be reflected by ______.
Fill in the blank(s) with the appropriate word(s).