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
You might also like to view...
A U.S. company is attempting to cut costs by shifting some of its services to Thailand. This process of shifting production of products or services overseas to cut costs often results in:
A. greater potential for market failure for those products and services. B. greater economic uncertainty in the market for those products and services. C. lower consumer prices on those products or services. D. lower production quantities of those products or services.
Refer to the above figure. Suppose this industry was perfectly competitive and then merged into one monopolistic firm. The monopoly would
A. reduce output from Q3 to Q1. B. raise price from P1 to P4. C. raise price from P1 to P2. D. reduce output from Q2 to Q1 and raise price from P3 to P4.
To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency, the Federal Reserve could
A) raise bank taxes. B) sell Treasury securities. C) raise government spending. D) lower the required reserve ratio.
Answer the following statements true (T) or false (F)
1. Mainstream economists identify wage-price rigidities as one cause of economic instability. 2. Mainstream economists believe that economic instability is primarily due to unexpected changes in consumer spending. 3. The mainstream view is that macro instability is caused by the volatility of the money supply which constantly shifts the aggregate demand curve around. 4. Mainstream economists think that the best way to stabilize the economy is to shift aggregate supply. 5. Monetarists argue that government policy interference in the economy is the primary cause of macroeconomic instability.