The phase of the business cycle that follows a recession is known as the:
A. peak.
B. recession.
C. recovery.
D. trough.
Answer: D
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With a contractionary monetary policy, as the output gap increases, the response of the central bank will tend to cause net capital outflows to ________ and cause the nominal exchange rate to ________
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
The correlation coefficient
A) lies between zero and one. B) is a measure of linear association. C) is close to one if X causes Y. D) takes on a high value if you have a strong nonlinear relationship.
According to the assignment rule, which of the following policy mixes is appropriate for a country with high inflation, a balance of payments surplus, and fixed exchange rates?
A. Expansionary fiscal policy and expansionary monetary policy B. Contractionary fiscal policy and expansionary monetary policy C. Contractionary fiscal policy and contractionary monetary policy D. Expansionary fiscal policy and contractionary monetary policy
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.