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...
Refer to the scenario above. Which of the following will happen in this case?
A) Neither of them will make any money. B) Only Elly will make money. C) Elly will trust, but her employee will defect. D) Elly will trust, and her employee will cooperate.
Exhibit 3-5 Supply for Tucker's Cola Data Quantity supplied per week(millions of gallons) Price pergallon 6 $3.00 5 2.50 4 2.00 3 1.50 2 1.00 1 .50 Exhibit 3-5 shows the supply schedule for Tucker's Cola. If Tucker's Cola and Refresh Cola are the only two suppliers in the cola market and Refresh Cola is willing to sell 5 million gallons when the price is $3.00, 4 million gallons when the price is $2.50, 3 million gallons when the price is $2.00, 2 million gallons when the price is $1.50, 1 million gallons when the price is $1.00, and 0 gallons when the price is $0.50 or less,
A. the market quantity supplied of cola will be 7 million gallons when the price is $2.00. B. Tucker's Cola follows the law of supply, but Refresh Cola does not. C. the market quantity supplied of cola is decreasing as price increases. D. the market supply curve is horizontal.
An excise tax
A. is often used to encourage the use of a good. B. is a value added tax (VAT). C. acts as a negative incentive to consume that good or service. D. is illegal in most cities in the United States.
The consumer price index or CPI includes
A) The cost of a standard market basket bought by consumers in the current year. B) The cost of a standard market basket bought by consumers in the current year relative to a base period. C) The cost of a standard market basket bought by producers in the current year. D) The cost of a standard market basket bought by producers in the current year relative to a base period.