In the short run, if the price level rises, then the overall economy can temporarily produce beyond its nominal capacity. One reason for this is that
A. existing capital equipment can be used more intensively.
B. wage rates rise almost simultaneously with the price level.
C. the unemployment rate usually rises dramatically along with the price level.
D. workers can be switched from counted to uncounted production.
Answer: A
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An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
The deductibility of state and local taxes at the federal level _____
a. biases states against raising property taxes b. increase the amount of federal taxes paid c. reduces the marginal cost of paying state and local taxes d. raises the costs of paying state and local taxes
When a government intervenes in an economy in a way that influences the relationship between households and businesses, it is:
A. serving the public good. B. reducing social welfare by interfering with the invisible hand. C. serving as an economic actor. D. serving as an economic referee.
Capitalism and free enterprise are common, and the United States
a. has just begun to move in that direction after years of central planning. b. has gone further in that direction than almost any other country. c. is becoming more "free," but is not as capitalistic as many others. d. is considering a major change to "free up" its economy as many others have. e. is leading the move toward greater central planning and control.