When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline
B. increase; raise; decline
C. decline; lower; expand
D. decline; raise; decline
Answer: C
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The figure above shows a perfectly competitive firm. When the firm maximizes its profit, its economic profit
A) is more than $300. B) is $300. C) is less than $300. D) The premise of the question is wrong because the firm is incurring an economic loss.
If a country's private saving is 100 and government saving is -100, domestic private investment
A) must be 200. B) must be zero. C) is equal to the net amount the economy borrows from other countries. D) is equal to the net amount the economy lends to other countries.
The price of domestic goods in terms of foreign goods is referred to as the
A) nominal exchange rate. B) real exchange rate. C) relative inflation rate. D) purchasing power parity rate.
A perfectly inelastic supply curve
a. cannot exist b. is horizontal c. has an elasticity of 0 d. has an elasticity of 1 e. is vertical