The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A
B. recessionary; C
C. recessionary; B
D. expansionary; A
Answer: D
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In a persisting demand-pull inflation
A) aggregate demand increases and potential GDP decreases. B) aggregate demand decreases and aggregate supply decreases. C) aggregate supply decreases and aggregate demand increases. D) aggregate supply increases and aggregate demand increases. E) None of the above answers is correct.
The primary method that decision makers use to evaluate choices among competing alternatives is called
A) the competitive forces model. B) cost-benefit analysis. C) heads-or-tails analysis. D) absolute advantage.
If last year's price level was 100 and this year's price level is 114, over the year the inflation rate has been
A) 14 percent. B) 114 percent. C) 12 percent D) 100 percent.
The scarcity of a good can be reduced only by
What will be an ideal response?