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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In a graph, a line has a negative slope if
A) the line is vertical. B) the line is horizontal. C) the line rises from right to left. D) the line rises from left to right.
Higher interest rates caused by an increase in the price level creates:
A. an indirect negative relationship between the price level and investment spending. B. an indirect positive relationship between the price level and investment spending. C. the incentive for firms to invest more in new factories. D. the incentive for individuals to spend more on consumption goods.
The means of payment function of money refers to the common unit for measuring how much something is worth
a. True b. False
The real business cycle model suggests that, with aggregate demand unchanged, increases in output would be associated with ________
A) an increase in inflation B) a decline in inflation C) and unchanged price level D) procyclical inflation