Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher
B. expansionary; higher; potential
C. recessionary; higher; potential
D. recessionary; lower; lower
Answer: B
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The reason economists consider monopoly to be socially undesirable is that monopolists:
A. can charge any price they want. B. produce less than the socially optimal level of output. C. earn too much economic profit. D. exploit the inelastic nature of demand.
An inside lag is
A) a policy aimed at reducing GDP. B) a lag in implementing policy. C) the period of time it takes for policies to work. D) a policy aimed at increasing GDP.
Consider the two graphs above. Suppose that financial liberalization enables more businesses to access credit markets. This would ________ the desired level of the capital stock, as depicted in graph ________
A) increase; B B) increase; A C) decrease; B D) decrease; A
An economist might argue that U.S. national defense should be funded through tax revenues because: a. U.S. citizens are not very patriotic
b. the government is always a more efficient provider of goods than the private market. c. the government always seeks to act benevolently on behalf of its citizens. d. individuals who refuse to contribute to a national defense fund cannot be excluded from benefiting from national defense.