The classical economists felt that wages and prices were flexible in
A) neither the upward direction nor the downward direction.
B) the upward direction but not in the downward direction.
C) the downward direction but not in the upward direction.
D) both the upward and downward directions.
D
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
In an economy with no income taxes or imports, the expenditure multiplier is
A) greater than 1 only if the MPC is greater than 1. B) less than 1 only if the MPC is less than 1. C) equal to 1 if the MPC is greater than 1. D) greater than 1 if the MPC is less than 1. E) always less than 1 no matter what the size of the MPC.
As the economy enters an expansion so that people's expected future incomes rise, there will be
A) a decrease in the nominal interest rate. B) a leftward shift in the supply of loanable funds curve. C) an increase in the supply of loanable funds. D) a leftward shift in the demand for loanable funds curve. E) None of the above answers is correct.
The central bank of the European Union is called the
A) Federal Reserve. B) European Central Bank. C) Banco Europe. D) Bundesbank.