Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher
B. expansionary; higher; potential
C. recessionary; higher; potential
D. recessionary; lower; lower
Answer: B
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The size of the simple spending multiplier is determined by the proportion of each new dollar that households decide to spend and how much they decide to save
a. True b. False Indicate whether the statement is true or false
The Clean Air Act aids new entrants in a regulated industry when demand increases and provides an incentive for existing firms to invest in new antipollution technology by:
A. allowing pollution permits to be traded within the industry. B. allowing pollution permits to be traded within the industry and allowing pollution permits to be traded across industries. C. restricting pollution permits from being traded. D. allowing pollution permits to be traded across industries.
Which approach to calculating GDP is especially useful in clarifying the resale of existing goods?
A. The income approach B. The value-added approach C. The expenditure approach D. Any of these measurements will allow that kind of clarification equally well.
Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production of both goods. If Chile has a comparative advantage in the production of copper, then Chile
A. has a lower opportunity cost for copper, which means that it should specialize in production of copper and engage in trade. B. has a lower opportunity cost for producing copper, but specialization is not feasible because Argentina has a lower monetary cost of copper production. C. should continue to produce copper, but only for domestic consumption, because trade is not a viable option. D. has a higher opportunity cost for copper, which means it should specialize in the production of wheat and engage in trade.