The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A
B. recessionary; C
C. recessionary; B
D. expansionary; A
Answer: D
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The logical principle for maximization can be stated as follows:
A) Do it if it feels good. B) Do it if the benefit from doing it is greater than the cost of doing it. C) Do it unless it's illegal, immoral, or fattening. D) Do it whenever the marginal benefit equals the marginal cost.
Under the Bretton Woods system, a fixed exchange rate supported by central banks was known as a(n) ________ exchange rate
A) equilibrium B) par C) fundamental D) target
Which of the following would cause movement downward along the demand curve for a normal good, leading to an increase in quantity demanded?
a. A decrease in the price of a substitute good b. An increase in the price of a complementary good c. A decline in the price of the good d. Consumer expectations that the good will become more expensive in the near future
Direct shipment of wine to individuals is illegal. Some wineries want the law revoked. They argue that the ability to ship directly to consumers helps small wineries and that shipping bans unfairly protect home-state wineries, raising prices to consumers. Others argue that the bans allow states to collect tax revenues and to keep wine from being sold to minors. What would most economists say about whether this ban should stay or be eliminated?
A. Because there would be people harmed, lifting the ban would not be Pareto optimal. Therefore, eliminating the ban is a bad policy. B. There are benefits to lifting the ban but also costs, and unless we know these costs and benefits, we cannot decide. C. Lifting the ban would make taxes less equitable. Therefore, the ban should remain. D. Economists would argue that competition is good and the ban prevents competition. Therefore, the ban should be lifted.