When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand
B. increase; raise; decline
C. decline; lower; decline
D. decline; raise; decline
Answer: B
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For the past several decades, the U.S. M1 multiplier has been between
A) 1.0 and 2.0. B) 2.5 and 3.0. C) 3.0 and 6.0. D) 6.5 and 10.0.
Scarcity is a situation in which ________
A) some people are poor and others are rich B) something is being wasted C) we are unable to satisfy all our wants D) long lines form at gas stations
Suppose the current price of a marketable permit to emit one ton of sulfur dioxide is $100 . If the marginal cost for a firm to reduce one ton of sulfur dioxide is $80, then:
a. the firm will buy the permit and emit one more ton of sulfur dioxide. b. the firm will reduce its emissions of sulfur dioxide by one ton. c. the firm will buy the permit and increase its emissions by 20 tons. d. the firm will shut down. e. the firm will be willing to pay up to $200 for a permit.
During an expansion, how do inflation and unemployment typically change?
A) Inflation and unemployment both rise. B) Inflation and unemployment both fall. C) Inflation falls and unemployment rises. D) Inflation rises and unemployment falls.