If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, potential output (Y*) equals 11,000, then government purchases must ________ to eliminate any output gap.
A. increase by 5,000
B. decrease by 200
C. increase by 1,000
D. increase by 200
Answer: D
You might also like to view...
Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $50, how many hats will be produced?
A) 0 B) 1 C) 2 D) 4
An unexpected rise in Housing Starts should send bond prices __________ and stock prices __________
A) up; up B) up; down C) down; up D) down; down
The consumer price index (CPI) _____ inflation because it includes an item in the market basket only after the product becomes _____
a. overstates; unpopular b. overstates; obsolete c. overstates; widely used d. understates; widely used e. understates; obsolete
Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left?
A. A reduction in business taxes. B. Production bottlenecks occurring when producers near full plant capacity. C. An increase in the price of imported resources. D. Deregulation of industry.