When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline
B. increase; raise; decline
C. decline; lower; expand
D. decline; raise; decline
Answer: C
Economics
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Initially, demand-pull inflation will
A) increase both the price level and increase real GDP. B) shift the aggregate supply curve rightward. C) decrease potential GDP. D) increase the price level and decrease real GDP. E) increase the price level and not change real GDP.
Economics
Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy buys
A) more cookies. B) fewer cookies. C) more hot chocolate. D) an equal amount of cookies and hot chocolate.
Economics