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
You might also like to view...
The marginal product of any input into the production process is the:
A. increase in output that is generated by an additional unit of input. B. decrease in input that is generated by an additional unit of output. C. constant ratio of inputs to outputs. D. ratio total output divided by total quantity.
If the bonds of two different countries are identical, their expected returns will:
A. always be equal. B. be equal only if the inflation rate is the same in each country. C. be equal only if the exchange rate between the two countries is fixed. D. be equal if capital flows freely internationally.
Suppose that the economy has a structural deficit of $100 billion and a budget deficit of $100 billion. It follows that output:
A. must be below its potential output. B. could be at, above, or below potential output. C. must equal potential output. D. must be above potential output.
Which will not be a determinant of the price elasticity of demand for an input?
A. The price of the input B. The substitutability of other resources for the input C. The elasticity of demand for the product it produces D. The total cost of an input as a proportion of the total cost of producing units of output