The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B
B. recessionary; C
C. recessionary; A
D. expansionary; A
Answer: C
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The Gramm-Rudman-Hollings Acts of 1985
a. led to the largest budget deficits in the history of the United States b. structured a one-quarter reduction in real discretionary spending over the period 1993–1998 c. required Congress to implement a pay-as-you-go plan d. required Congress to cut every budgetary item by the same percentage if it could not reduce the deficit to zero through discretionary budget making e. required Congress to pay for new spending by cutting old spending or raising taxes
Cole is refinishing an antique china cabinet and has already spent $180 on the restoration. He expects to be able to sell the cabinet for $360 . Cole discovers that he needs to do an additional $200 worth of work to make the cabinet worth $360 to potential buyers. He could also sell the cabinet now, without completing the additional work, for $100 . What should Cole do?
a. He should sell the cabinet now for $100. b. He should keep the cabinet since it wouldn't be rational to spend $380 restoring a cabinet and then sell it for only $360. c. He should complete the additional work and sell the cabinet for $360. d. It does not matter which action he takes since the outcome will be the same either way.
Today, people changed their expectations about the future. This change
a. can cause a movement along a demand curve. b. can affect future demand but not today's demand. c. can affect today's demand. d. cannot affect either today's demand or future demand.
The functional relationship between the trade balance and the real exchange rate is:
a. a negative, or decreasing, function. b. a positive, or increasing, function. c. a parabolic function. d. impossible to quantify because there are so many unknown variables.