ECON help plz!! True/False?
True / false questions. Please, explain you answer
1. When the actual Real GDP is equal to potential Real GDP, there is no unemployment
2. The automatic adjustment (self-correcting) from the short-run to the long-run equilibrium is
due to the government policy action.
3. Automatic stabilizers refer to the money supply and interest rates that automatically increase
or decrease with business cycle.
4. When a bank creates loans, it does not create money.
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Answers & Comments
1. False. When they equal each other there is not cyclical unemployment but there is frictional and structural: the natural rate of unemployment
2. False. A self regulating economy dOesnt need govt action. That's why it's SELF regulating.
3. False. Automatic stabilizers refer to govt spending and taxes
4. False. When a bank creates loans it holds a fraction so it creates money but not wealth