Refer to Figure 10.3. If full-employment GDP is $500 billion and the economy is on AD0,
A. An inflationary gap exists, and AD must decrease by less than $100 billion to eliminate it.
B. A recessionary gap exists, and AD must increase by more than $100 billion to eliminate it.
C. An inflationary gap exists, and AD must decrease by more than $100 billion to eliminate it.
D. An inflationary gap exists, and AD must increase by $100 billion to eliminate it.
Answer: C
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In the money market, an excess demand of money will:
A) increase the supply of bonds, increase bond prices, and decrease interest rates. B) increase the supply of bonds, decrease bond prices, and decrease interest rates. C) increase the supply of bonds, increase bonds prices, and increase interest rates. D) increase the supply of bonds, decrease bond prices, and increase interest rates.
Over the period 1980–2007, the annual rate of increase in government spending on elementary, secondary, and higher education, measured in constant dollars, was approximately
a. 1 percent b. 3 percent c. 10 percent d. 15 percent e. 25 percent