The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment.
B. exogenous spending.
C. recessionary gaps.
D. expansionary gaps.
Answer: D
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If a developing country has sufficient reserves, the buying and selling of foreign currency by the central bank is:
A. likely to have a much smaller impact on the exchange rate than in developed countries. B. completely ineffective on the exchange rate. C. likely to have a much greater impact on the exchange rate than in developed countries. D. likely to have roughly the same impact on the exchange rate as in developed countries.
Fiscal policy is most effective in influencing aggregate demand
A. under a fixed exchange-rate system without sterilization. B. under a floating exchange-rate system with a high degree of capital mobility. C. under a floating exchange-rate system with a low degree of capital mobility. D. under a fixed exchange-rate system with sterilization.
The manner in which FDIC deposit insurance is set up in the United States encourages banks to
A. maintain excess reserves that are too great. B. reject some loans that probably would be profitable. C. make riskier loans than they otherwise would. D. be too conservative in their lending practices.
What is the difference between buying stocks and buying bonds?
A) A stock can possibly pay dividends forever, but bonds have a fixed number of payments. B) Differences of opinion about a stock's future may vary considerably but there is less difference about a bond's future. C) The future growth of a stock is more uncertain than the payments of a bond. D) All of these are differences between stocks and bonds.