Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential
B. recessionary; higher; potential
C. recessionary; lower; lower
D. expansionary; higher; higher
Answer: A
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Explain how free international trade tends to lead to factor price equalization under the assumptions of the HO model. What does this process predict about which groups should be in favor of or opposed to free international trade?
What will be an ideal response?
Of the three players in the money supply process, most observers agree that the most important player is
A) the United States Treasury. B) the Federal Reserve System. C) the FDIC. D) the Office of Thrift Supervision.
The Phillips curve illustrates the relationship between:
a. change in the money supply and change in unemployment. b. tax rates and tax revenues. c. the equilibrium level of income and the employment rate. d. inflation and unemployment.
The sharp increase in the excess reserves held by the commercial banking system since the second half of 2008 increases the potential for
a. a sharp contraction in the money supply, which is likely to increase the length and severity of the recession. b. a rapid increase in the money supply, potentially leading to inflation. c. a gradual increase in the money supply, following the trend of the previous decade. d. a reduction in the ability of banks to extend additional loans.