If the SRAS curve intersects the AD curve to the right of Natural Real GDP, the economy is
A) in a recessionary gap.
B) in either a recessionary gap or an inflationary gap, but we need more information to determine which one.
C) in an inflationary gap.
D) at full-employment Real GDP.
C
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When a firm uses profits to purchase new capital equipment, it is engaging in
A) tax evasion. B) balance sheet accounting. C) reinvestment. D) the most risky way the firm can obtain investment funds.
Automatic stabilizers
A. are probably insufficient to completely offset strong recessionary pressures. B. tend to accelerate abrupt changes in economic activity and cause expenditures to move pro-cyclically. C. give policy makers more time to formulate nondiscretionary policy. D. are unimportant to those workers most likely to be laid off or otherwise harmed by recessions.