The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier.
B. self-correcting property.
C. short-run equilibrium property.
D. long-run equilibrium property.
Answer: B
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Spencer and Brander's model highlights the conventional assumption that
A) government involvement in business or in the economy tends to fail. B) government subsidies tend to waste taxpayer's money. C) government subsidies cannot create a successfully competing export. D) government tends to distort when it displaces Adam Smith's Invisible Hand. E) government subsidies can produce profits that exceed the subsidy's value.
Given 'M' represents money supply, 'V' represents velocity of money, 'P' represents the price level, and 'Q' represents the total domestic output. Which of the following correctly describes the equation of exchange?
a. MV = P + Q b. MV = P - Q c. MV = P ??Q d. MV = P/Q