Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary
B. B; no output
C. B; expansionary
D. A; a recessionary
Answer: A
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Suppose Jennifer derives $100 in marginal benefits from her first skiing trip and $80 from her third tri
A) more than $100. B) between $100 and $80. C) between $79 and $51. D) less than $51. E) some amount that cannot be calculated without additional information.
Suppose a pickpocket steals your $20 bill and spends all of it on pizza and beer. What happens to GDP?
A) GDP increases by twenty dollars. B) GDP decreases by twenty dollars. C) Because the positive balances out the negative, GDP remains unchanged. D) GDP decreases because somebody has clearly been made worse off.
Which of the following is NOT a reason for the weak recovery following the 2007-2009 recession?
A) Recessions started by financial crises are almost always severe. B) The decline in the automobile industry appeared to be structural. C) The collapse of the housing market was long lived. D) The recession was caused by a decline in short-run aggregate supply.
On the graph above, an increase in government spending, with no change in taxes, is likely to move the economy from point 1 to point ________
A) 8 B) 6 C) 3 D) 5