Which of the following is true about income inequality?
A. Inequality tends to diminish as the population increases.
B. Inequality tends to be greatest in the poorest countries.
C. Inequality tends to get worse as a country develops.
D. Inequality is not an issue for developed countries.
Answer: B
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If there is an autonomous decrease in spending (a leftward shift in the aggregate demand curve) and the Fed wishes to hold real income constant, then the Fed would:
A) decrease the money supply yielding a leftward shift in the aggregate demand curve. B) increase the money supply yielding a rightward shift in the aggregate demand curve. C) hold the money supply constant. D) none of the above.
The rational-expectations hypothesis suggests that the forecasts that people make concerning future inflation rates
A. consistently underestimate the actual rate of inflation in the future. B. consistently overestimate the actual rate of inflation in the future. C. are always correct. D. are correct on average, but are subject to errors that are distributed randomly.