The economy's self-correcting mechanism to eliminate a recessionary gap relies on
a. falling interest rates that shift the aggregate demand curve outward.
b. falling wage rates that shift the aggregate supply curve outward.
c. rising wage rates that shift the aggregate supply curve inward.
d. increases in the price level that shift the aggregate supply curve inward.
b
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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.
Refer to Figure 11-2. Diminishing returns to labor set in
A) after L1. B) after L2. C) after L3. D) immediately.
Withholding of the federal income tax _____
a. was first used during the civil war b. was first used during World War I c. was first used during World War II d. was first used after World War II
Economists believe that production possibilities frontiers are often bowed because
a. trade-offs inevitably create unemployment. b. resources are not completely adaptable. c. opportunity costs are constant. d. of improvements in technology.