If Policy Makers Do Nothing in Response to an Inflationary

question 123

Multiple Choice

If policy makers 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

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Definitions:

Fixed Cost

refers to expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Cell Phones

Portable electronic devices that allow for telecommunication over a network of stations without the need for a physical connection to a telephone line.

Output Level

The output level refers to the total amount of goods or services produced by an individual, firm, or economy at a given time.

Total Fixed Cost

The sum of all costs that do not change with the level of output, such as rent, salaries, and loan payments.