The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier.
B. self-correcting property.
C. short-run equilibrium property.
D. long-run equilibrium property.
Answer: B
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Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk, the
A) quantity supplied of milk falls short of the quantity demanded. B) quantity supplied of milk exceeds the quantity demanded. C) supply increases. D) demand decreases. E) price of milk remains $4 per gallon.
If a perfectly competitive firm incurs an economic loss, it should
A) shut down immediately. B) try to raise its price. C) shut down in the long run. D) shut down if this loss exceeds fixed cost.
Which of the following is likely to result in a lower equilibrium price? a. An increase in both demand and supply
b. A decrease in both demand and supply. c. An increase in demand and a decrease in supply. d. A decrease in demand and an increase in supply.
According to new trade theory, the first mover's ability to benefit from increasing returns ______ for other firms.
Fill in the blank(s) with the appropriate word(s).