Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential
B. expansionary; higher; potential
C. recessionary; lower; potential
D. recessionary; lower; lower
Answer: C
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A vertical demand curve
A) is impossible. B) reasonably represents demand for essential goods. C) has a price elasticity of negative infinity since people will pay an infinite amount for the good. D) represents a normal good.
Variable costs are
a. the same as sunk costs b. irrelevant to decision making, because they are sunk c. the costs of inputs that vary with the level of production d. the costs of inputs that do not vary with the level of production e. the additional total cost associated with producing an additional unit of output
Consumer sovereignty is mainly applicable to ______ economies.
a. traditional b. centralized c. command d. market
An increase in the rent that a firm pays for its factory does not increase ______
A. total cost B. fixed cost C. marginal cost D. average fixed cost