The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment.
B. exogenous spending.
C. recessionary gaps.
D. expansionary gaps.
Answer: D
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If the marginal benefit of a good exceeds its marginal cost
A) we've achieved efficient resource use. B) we should produce more to achieve the allocatively efficient use of resources. C) we should produce less to achieve the allocatively efficient use of resources. D) we cannot tell if more or less should be produced to achieve the allocatively efficient use of resources.
Refer to Figure 17-4. Consider the shift in the short-run Phillips curves shown in the above graph. This shift may be explained by
A) an increase in the expected rate of inflation from 4.0 to 5.5 percent. B) an increase in the natural rate of unemployment from 5.0 to 6.2 percent. C) either an increase in the natural rate of unemployment from 5.0 to 6.2 percent or an increase in the expected rate of inflation from 4.0 to 5.5 percent. D) None of the above is correct.