To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change.
B. increase.
C. decrease.
D. either increase or decrease depending on the relative shifts of AD and AS.
Answer: C
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When economic profits in an industry are zero and implicit costs are positive: a. accounting profits will be greater than zero
b. resources will be attracted to the industry. c. resources will not tend to either enter or leave the industry, other things equal. d. both (a) and (c) will be true.
The second stage of economic analysis includes asking
a. if the process an individual uses to make decisions is rational or not. b. what may cause preferences to change. c. how the optimal solution would change if constraints change. d. what other criteria might be used to evaluate an outcome.
If the supply of loanable funds curve shifts right, then the equilibrium
a. interest rate and level of net capital outflows rise. b. interest rate rises and the equilibrium level of net capital outflow falls. c. interest rate falls and the equilibrium level of net capital outflow rises. d. interest rate and level of net capital outflows fall.
Which of the following is a component of the classical model?
a. Changes in aggregate demand cause movements along the long-run aggregate supply curve. b. An increase in aggregate demand shifts the short-run aggregate supply curve rightward. c. Changes in aggregate demand shift the long-run aggregate supply curve rightward. d. An increase in aggregate demand quickly lowers the price level.