When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline
B. increase; raise; decline
C. decline; lower; expand
D. decline; raise; decline
Answer: C
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Explain how a bubble can develop in the market for an asset
What will be an ideal response?
"When workers acquire tools, they become more productive.". This statement reflects the general fact that __________ is a determinant of productivity
Fill in the blank(s) with correct word
An increase in the capital stock
A. can increase output, but only if it is accompanied by an increase in the labor force. B. cannot increase output, even if it is accompanied by an increase in the labor force. C. provides valuable services directly, but not indirectly. D. can increase output, even if it is not accompanied by an increase in the labor force.
Jake, Sr. sells the family business, a factory that produces snake oil, to Jake, Jr., for $100, even though the factory has been assessed at $400,000. How will this transaction affect GDP?
A. Investment will increase by $100. B. Investment will increase by $400,000. C. Consumption will increase by $400,000. D. GDP will not be affected by the transaction.