How will an increase in the world price of crude oil influence the economy of an oil-importing country such as the United States?
A. Aggregate supply will decrease, leading to a decrease in real GDP.
B. Aggregate supply will increase, leading to an increase in real GDP.
C. Aggregate supply will increase, leading to an increase in prices and smaller GDP.
D. A change in the price of an imported good will not affect the domestic economy of an oil-importing country.
Answer: A
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
The quantity theory of inflation indicates that the inflation rate equals
A) the growth rate of the money supply minus the growth rate of aggregate output. B) the level of the money supply minus the level of aggregate output. C) the growth rate of the money supply plus the growth rate of aggregate output. D) the level of the money supply plus the level of aggregate output.
One reason stagflation is difficult to recover from is because:
A. wages are sticky downward. B. input prices increase with output prices. C. less output requires less inputs to be hired. D. prices tend to adjust more quickly downward than upward.
Which of the following would generate positive externalities?
a. flu vaccinations b. pesticides used to create greater yields per bushel c. cigarette smoking in elevators d. litter left at the beach e. an unkempt front yard