When actual output equals potential output, there is ________ output gap and the inflation rate will ________.
A. no; be equal to the expected rate of inflation
B. an expansionary; exceed the expected rate of inflation
C. an expansionary; be lower than the expected rate of inflation
D. a recessionary; exceed the expected rate of inflation
Answer: A
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An oil company is considering drilling in the Gulf at a current cost of $300,000 with an expected profit of $500,000 in three years. The current market rate is 10 percent. Should the company make the investment?
A. Yes, the future value of the profit is greater than the present value of the cost B. No, the future value of the profit is less than the present value of the cost C. Yes, the present value of the profit is greater than the present value of the cost D. No, the present value of the profit is less than the present value of the cost
When quantity demanded is greater than quantity supplied, there is a _____________.
Fill in the blank(s) with the appropriate word(s).