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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The funds used to buy and operate physical capital are
A) depreciation. B) financial capital. C) saving. D) wealth.
A firm possesses too much capital if ________
A) the real rental cost of capital is equal to the marginal product of capital B) the real rental cost of capital is less than the marginal product of capital C) its investment spending exceeds its consumption outlays D) the real rental cost of capital is more than the marginal product of capital
If aggregate output is falling, _____
a. federal budget deficit decreases b. tax revenue increases c. automatic stabilizers will tend to increase the size of the deficit d. automatic stabilizers will tend to decrease the size of the deficit e. transfer payments decrease as fewer people become eligible for public assistance
Positive relationships are also referred to as inverse relationships.
Answer the following statement true (T) or false (F)