The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output.
B. government policy.
C. decreasing inflation only.
D. increasing or decreasing inflation.
Answer: D
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When the Federal Reserve sells a government bond to a primary dealer, reserves in the banking system ________ and the monetary base ________, everything else held constant
A) increase; increases B) increase; decreases C) decrease; increases D) decrease; decreases
If deviations from trend in a macroeconomic variable are negatively correlated with deviations from trend in real GDP, that variable is said to be
A) useless in predicting future movements in real GDP. B) procyclical. C) countercyclical. D) acyclical.
If people have a sudden increase in confidence in the open economy of the U.S. and want to invest there, the interest rate:
A. increases, as NCO increases. B. falls, as NCO falls. C. falls, as NCO increases. D. increases, as NCO decreases.
International trade
A) harms consumers but helps exporting firms. B) helps consumers but harms exporting firms and their workers. C) helps consumers but hurts firms that are less efficient than their foreign competitors. D) helps consumers and firms that compete with their foreign competitors.