Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential
B. expansionary; higher; potential
C. recessionary; lower; potential
D. recessionary; lower; lower
Answer: C
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The table below shows the number of labor hours required to produce one umbrella and one bushel of corn in the United Kingdom and the rest of the world. What is the opportunity cost of producing a bushel of corn in the United Kingdom? Labor hours to make:In the United KingdomIn the Rest of the World1 umbrella3.002.001 bushel of corn1.000.25
A. Eight umbrellas B. 1/8 of an umbrella C. Three umbrellas D. 1/3 of an umbrella
The money supply falls from $900 billion to $850 billion. According to the simple quantity theory of money, the price level will ___________ by __________ percent.
A. rise; 5.6 B. fall; 5.6 C. rise; 6.2 D. fall; 6.2
At what level of output do consumers demand fewer goods than businesses are producing?
a. Y1
b. Y*
c. Y2
d. 0
The monetary base increased by 20% during the contraction of 1929-1933, but the money supply fell by 25%. Explain why this occurred. How can the money supply fall when the base increases?
What will be an ideal response?