The Fact That Output Gaps Will Not Last Indefinitely, but Will

question 157

Multiple Choice

The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:

• A)short-run equilibrium property.
• B)self-correcting property.
• C)income-expenditure multiplier.
• D)long-run equilibrium property.

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Definitions:

Domestic Interest Rate

The rate at which interest is paid by a borrower for the use of money that they borrow from a lender within the domestic market.

Loanable Funds

The money available for borrowing in the financial markets, coming from savings that consumers and businesses want to lend out.

Trade Deficits

A situation where the value of a country's imports exceeds the value of its exports.

Net Exports

The value of a country's total exports minus its total imports, representing the net effect of foreign trade on an economy’s spending.