The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B
B. recessionary; C
C. recessionary; A
D. expansionary; A
Answer: C
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Suppose an economy is initially in equilibrium and there is a sudden increase in oil prices. Which of the following is the most likely result?
a. Growth in real GDP b. Price stability c. Full employment output d. Stagflation e. Deflation
If individuals who sit in the back of the classroom receive lower grades on average than the rest of the class, does that mean that sitting in the back of a classroom causes one to perform poorly on exams?
a. Not necessarily. The reoccurrence of a certain relationship between two variables does not necessarily imply causation. b. It is not possible for an economist to determine causation between variables. c. The reoccurrence of such a relationship is sufficient evidence that sitting in the back of a classroom will lead to lower grades. d. The reoccurrence of such a relationship is sufficient evidence that students who receive low grades prefer to keep a low profile and always sit in the back of the classroom.
If the budget deficit increases then
a. saving and the interest rate rise. b. saving rises and the interest rate falls. c. saving falls and the interest rate rises. d. saving and the interest rate fall.
An increase in aggregate demand:
A. raises potential output. B. has an unpredictable effect on potential output. C. reduces potential output. D. does not change potential output.