When an expansionary gap exists, actual output ________ potential output and the rate of inflation will tend to ________.
A. is less than; increase
B. exceeds; increase
C. is less than; decrease
D. exceeds; decrease
Answer: B
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An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
Which of the following represents the chain of causation for expansionary policy?
A. An increase in real GDP increases investment, which increases the money supply, which reduces the interest rate. B. An increase in the money supply reduces the interest rate, which increases investment, which increases real GDP. C. An increase in investment increases the interest rate, which increases the money supply, which increases real GDP. D. An increase in the money supply increases investment, which increases the interest rate, which increases real GDP.
In the principal-agent relationship, the principal is
A) the person who is placed in control over resources that are not his own and agrees to compensate the resource owner in the event of outcomes that do not satisfy the resource owner. B) the person who places his resources in professional hands in exchange for the professional's promise to act on the resource owner's behalf. C) the owner of a resource that has hired a third party to act in the best interest of that third party. D) the person who is placed in control over resources that are not his own, with a contractual obligation to use these resources in the interests of some other party.
The production possibilities frontier is a diagram that shows:
a. the productively efficient combinations of two products that an economy can produce given the resources it has available. b. the productively efficient combinations of two products that can be produced on a worldwide basis given demand. c. the productively inefficient combinations of a single product that an economy can produce given the resources it has available. d. the productively efficient combinations of two products that an economy can produce regardless of if the resources are available.