Suppose an economy has an upward-sloping aggregate supply curve and a recessionary GDP gap equal to $50 billion. If aggregate demand increases by a total of $50 billion,
A. The resulting equilibrium GDP will be greater than full-employment GDP because of demand-pull inflation.
B. The resulting equilibrium GDP will be lower than full employment GDP because some of the additional spending will drive up prices instead of increasing output.
C. The recessionary GDP gap will be eliminated.
D. Cyclical unemployment will increase.
Answer: B
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Refer to the scenario above. What is likely to be the impact on Firm B's sales if none of the firms decide to sponsor the event?
A) A 7% increase in sales B) A 0% increase in sales C) A 2% increase in sales D) A 10% increase in sales
Asarta Inc. is polluting into the nearby aquifer and the citizens of Buttersville demand that this be cleaned up. If the benefit to cleaning up the aquifer is estimated to be about $133,000 and the cost is estimated at $130,000 will the aquifer get cleaned?
A. Yes, because the benefit is high. B. No, because the costs outweigh the benefits. C. Yes, because the benefits outweigh the costs. D. Uncertain, with the information given.
The graph illustrates the supply of sweaters. Which of the following events will increase the quantity supplied of sweaters?
A) a rise in the price of a sweater B) a rise in the wage rate paid to the workers who make sweaters C) a rise in the expected future price of a sweater D) an increase in the number of sellers of sweaters E) a decrease in the number of sweater buyers
Open market operations directly change the rate of interest at which banks can borrow funds from the Fed
a. True b. False Indicate whether the statement is true or false