Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD 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. D; B
C. A; B
D. B; C
Answer: B
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
Discuss some of the general conclusions arrived at about supply-side tax initiatives
In a market economy, entrepreneurs are most concerned with:
a. Maximizing utility or satisfaction from limited incomes b. Increasing the wages and salaries of workers c. The unselfish pursuit of national welfare d. Maximizing profits or minimizing losses
The buying and selling of foreign currency is known as:
a) foreign exchange. b) foreign trade. c) the balance of payments. d) the capital account.