An inflationary gap exists when consumers and businesses are demanding more output than the economy is capable of producing at full employment

People make mistakes in allocating their time

a. only when leisure time is an inferior good b. because expectations are not always fulfilled c. more often when the cost of making a mistake is high d. only when economists remove the assumption that individuals are rational e. because information is free and readily available

Which of the following shifts aggregate demand to the left?

a. an increase in the price level. b. households decide to save a larger fraction of their income. c. an increase in net exports. d. Congress passes a new investment tax credit.