Based on the figure below. An economy in short-run equilibrium at point A has a(n) ________ gap. The gap could be eliminated by the self-correcting mechanism of the economy and eventually achieve long-run equilibrium at point ________ or the central bank could intervene with monetary easing establishing the long-run equilibrium at point ________. 
A. recessionary; B; C
B. expansionary; B; C
C. expansionary; C; B
D. recessionary; C; B
Answer: D
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If the per-worker production function shifts up,
A) negative technological change has occurred in the economy. B) it now takes more capital per hour worked to get the same amount of real GDP per hour worked. C) an economy can increase its real GDP per hour worked without changing the level of capital per hour worked. D) the per-worker production function becomes flatter.
How does rapid price adjustment, as assumed in classical models, result in separation of real from nominal variables (the classical dichotomy)?
What will be an ideal response?
Fixed exchange rates give countries too much freedom over their monetary policies, thereby threatening higher rates of inflation
a. True b. False Indicate whether the statement is true or false
The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier. B. self-correcting property. C. short-run equilibrium property. D. long-run equilibrium property.