Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher
B. expansionary; higher; potential
C. recessionary; higher; potential
D. recessionary; lower; lower
Answer: B
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Refer to the above figure. As the real national income expands from Y2 to Y3,
A) tax revenues fall. B) a budget deficit occurs. C) government transfers rise. D) a budget surplus occurs.
If the banking system has a required reserve ratio of 25 percent, then the money multiplier is
A) 2. B) 4. C) 5. D) 10.
The demand for apple pies is perfectly elastic. If the government taxes apple pies at $1 a pie, then
A) the seller pays the entire tax. B) the buyer pays the entire tax. C) the seller and the buyer split the tax evenly. D) the seller and the buyer split the tax but the seller pays more. E) who pays the tax depends on whether the government imposes the tax on pie buyers or on pie sellers.
An asset is ________
A) equal in value to its corresponding liabilities and net worth B) a debt for the owner of the asset C) a net outflow from the revenues of a producing firm D) anything that can be owned and has value