If policymakers do nothing in response to an inflationary gap, what will happen?
A. A rapid movement toward lower unemployment and higher inflation
B. A rapid movement toward lower unemployment and lower inflation
C. A slow movement toward higher unemployment and higher inflation
D. A slow movement toward lower unemployment and lower inflation
Answer: C
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George believes that the inflation in this year will be around 9% because it was around 9% in the previous year. George can be said to have:
A) rational expectations. B) marginal expectations. C) adaptive expectations. D) composite expectations.
Which of the following will be counted as an expenditure in the measurement of GDP? (Assume that none of the transactions is concealed from the relevant authorities.)
A) the value of a used automobile that remains unsold on the dealer's lot B) purchase of a lamp at a neighborhood garage sale C) purchase, using foodstamps, of a loaf of bread D) payment by a parent to her child for doing household laundry E) purchase of flour by a bakery