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
Answer: A
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Explain how an increase in government expenditure designed to increase aggregate demand can increase potential GDP and aggregate supply
What will be an ideal response?
"Economic growth" has occurred if
A) inflation rate between this year and last year is zero or less. B) GDP this year exceeds the Real GDP this year. C) unemployment rate this year is above the natural rate of unemployment. D) Real GDP this year is greater than Real GDP last year.
A currency that is pegged to another currency is usually changed on a supply-and-demand basis.
a. true b. false
The rationing function of prices means that
A. businesses determine what goods consumers should purchase. B. buyers and sellers synchronize their decisions through the price system. C. all goods and services are produced by large firms. D. government is responsible for setting the prices of basic foods.