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
Answer: A
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Which of the following is an example of a fiscal stimulus?
A) decrease in transfer payments B) decrease in taxes C) decrease in government expenditure on goods and services D) increase in taxes E) none of the above
As the price level decreases, other things being equal, a. aggregate demand increases
b. the quantity of real gross domestic product demanded increases. c. the quantity of real gross domestic product demanded decreases. d. real gross domestic product supplied increases.
A structural deficit refers to that part of the deficit that exists as a result of a downturn in economic activity
Indicate whether the statement is true or false
Aggregate behavior is
A. the behavior of all households and firms together. B. the behavior of each individual. C. the behavior of each household and firm. D. none of the above.