If the economy is experiencing a recessionary gap and the government wants to accelerate the adjustment to the long-run equilibrium, it should
A. reduce aggregate demand by cutting government spending or raising taxes.
B. increase aggregate demand by increasing government spending or cutting taxes.
C. increase aggregate supply by increasing government spending or lowering taxes.
D. increase aggregate supply by cutting government spending or raising taxes.
Answer: B
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A decrease in demand and a decrease in supply will lead to
A) unambiguous increases in both price and quantity. B) unambiguous decreases in both price quantity. C) an unambiguous decrease in price, but the effect on quantity is indeterminate. D) an unambiguous decrease in quantity, but the effect on price is indeterminate.
Which of these explain why growth is an important economic goal?
When future labor income falls in a small open economy, it causes the current account to ________ and investment to ________.
A. fall; remain unchanged B. rise; rise C. rise; remain unchanged D. fall; rise
Excise taxes or duties placed on imported products are:
A. Import quotas B. Protective tariffs C. Nontariff barriers D. Export subsidies