Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output
B. D; an expansionary
C. B; recessionary
D. D; a recessionary
Answer: D
You might also like to view...
Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
What does it mean for a person or nation to have a comparative advantage in producing a product?
What will be an ideal response?
For an oligopoly, when the quantity effect does not outweigh the price effect, the firm:
A. has no incentive to increase output. B. has no incentive to decrease output. C. has an incentive to increase output. D. None of these statements is true.
Alex wants to borrow $1,000 from Kara. If he repays the loan in one year, Kara would require him to pay 5 percent interest on the loan. If Alex wants to repay the loan over three years, but Kara strongly prefers present to future consumption, we would
expect the interest rate on a three-year loan to be: A. lower than for a one-year loan. B. greater than for a one-year loan. C. the same as for a one-year loan. D. higher if Kara expected there to be no inflation over the loan repayment period.