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
You might also like to view...
Among the opportunity costs of a firm are all of the following EXCEPT
A) the owner's forgone wage. B) costs of resources bought in markets, such as labor. C) normal profits. D) economic profits.
In the fooling model, real wages
A) are countercyclical. B) are procyclical. C) are constant. D) show no clear cyclical pattern.
Both positive nor negative supply shocks a. Change AD
b. Permanently change real output in an economy. c. Change the price level in the long run. d. None of the above are true
Suppose that the marginal revenue product of the eighth worker hired is $12 an hour and the wage rate is $10 an hour. We can say that
A. not enough labor is being hired. B. just enough labor is being hired. C. too much labor is being hired.