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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An entrepreneur
a. always makes a profit b. generally avoids risky situations c. claims the residual (i.e., whatever is left over) after other resource suppliers are compensated d. is a parasite that benefits by not paying other resources for their services e. is the manager who runs an enterprise and keeps the customers happy
Money is created when someone
A. takes out a bank loan. B. pays back a bank loan. C. spends money. D. saves money.
Adjusting monetary growth based on previous changes in nominal GDP
A) is relatively easy for the Fed to undertake because the implementation lag is quitelong. B) could be destabilizing because of the uncertainty of the length of impact lags. C) is an effective policy because it allows the Fed to influence future macroeconomic performance. D) raises the price level proportionately.
Tools a government might use to pursue industrial policy might be all of the following except:
A. directly manipulate markets in order to control prices. B. incentives for foreign direct investment. C. investment in research to create more growth. D. offer tax breaks to firms.