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
Answer: C
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The distinction between physical and financial capital is that
A) physical capital is equal to financial capital minus depreciation. B) financial capital depreciates and physical capital does not. C) the value of financial capital depends on the amount of available physical capital. D) physical capital is equal to financial capital plus depreciation. E) financial capital is used to purchase and operate physical capital.
Growth accounting, popularized by Robert Solow, attempts to attribute a change in aggregate output
A) to its most important single cause. B) separately between changes in government policy and changes in total factor productivity. C) separately between changes in total factor productivity and changes in the supplies of factors of production. D) separately between changes in the supplies of factors of production and changes in government policy.
To close an inflationary gap, the government will
a. run budget deficits b. decrease taxes, leaving government spending unchanged c. increase both taxes and government spending d. run budget surpluses e. legislate a reduction in the rate of inflation
An example of the command-and-control approach is public education.
Answer the following statement true (T) or false (F)