Which of the following is true?
A. A recession will lead to reduced output in the future, but inflation has no effect on future output.
B. A recession will lead to increased output in the future, but inflation will lead to decreased output in the future.
C. Both recessions and inflations may reduce output in the future.
D. A recession will lead to reduced output in the future, but inflation will lead to increased output in the future.
Answer: C
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Under a flexible exchange system, which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?
a. an acceleration in the nation's inflation rate b. a balance of trade deficit c. a current account deficit d. a decline in the domestic inflation rate
What happens to the monetary base if the domestic currency is undervalued (the central bank fixed the exchange rate below equilibrium) and the central bank intervenes to fix the exchange rate at its current level?
a. The change in the monetary base is ambiguous. b. The monetary base is only affected by interventions of the central bank when the domestic currency is overvalued. c. The monetary base will rise. d. The monetary base is never affected by interventions of the central bank. e. The monetary base will fall.
Purchases of new houses are the most volatile type of expenditures because they are very sensitive to ________, which is highly volatile.
A. GDP B. the inflation rate C. disposable income D. the interest rate
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What will be an ideal response?