Economists use the terms neutral good and normal good interchangeably
Indicate whether the statement is true or false
False
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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
What is the paradox of value and how is the paradox resolved?
What will be an ideal response?
Increases in the price level will
A) raise consumption because some goods and services are more affordable. B) raise consumption because real wealth increases. C) lower consumption because real wealth decreases. D) lower consumption because goods and services are less affordable.
Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C B. B; C C. B; A D. D; B