Which of the following is true when an economy produces at full employment, but consumers, government, businesses, and the foreign sector do not buy all the output?
A. Inventories are depleted.
B. Unemployment falls.
C. The price level rises.
D. There is a recessionary gap.
Answer: D
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If an industry is a natural monopoly and regulators decide that the firm must price at marginal cost, then consumers will be ________ off than if the firm was unregulated and the firm's owners will be ________ off than if it was unregulated
A) better; better B) better; worse C) worse; better D) worse; worse
Governments promote long-run inflation when they depend on ________ to finance their expenditures
A) issuing bonds B) taxation C) raising the national debt D) money creation E) selling off assets
Suppose that the United Kingdom pegs the pound to the euro and the European Central Bank decides to use monetary policy to offset the possible inflationary effects of European expansionary fiscal policy. Would it expand, contract, or not change the European money supply?
A) expand B) contract C) not change D) The answer cannot be determined using the information provided.
Why are financial-sector crises scarier than collapses in other sectors of the economy?
A. Financial-sector crises happen more often than collapses in other sectors. B. If the financial sector fails, it can bring the whole economy down with it. C. The financial sector is the biggest sector. D. Most people work in the financial sector.