Which of the following is included in M1?

For a given set of prices, two consumers choose bundles that are off the contract curve. In a competitive market,

A) prices will adjust until the consumers choose bundles that are on the contract curve. B) the indifference curves will shift back to the contract curve. C) the contract curve will shift to connect these bundles. D) no adjustments need to be made.

If the natural unemployment rate is 5.5 percent, then the economy is in an inflationary gap when the actual unemployment rate is

A) greater than 5.5 percent. B) less than 5.5 percent. C) 0 percent. D) 5.5 percent.