In a recessionary period of low economic output, a Neoclassical economist would:
a. propose increases in government spending.
b. believe decreases in prices will eventually return the economy to potential output.
c. propose increases in the supply of money.
Answer: b. believe decreases in prices will eventually return the economy to potential output.
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Suppose the world price of a shirt is $10. If the United States imposes a tariff of $5 a shirt, then the price of a shirt in the
A) world rises to $5. B) United States rises to $15. C) United States falls to $5. D) world rises to $15 E) world falls to $5.
A curve that shows all the combinations of two inputs, such as labor and capital, that will produce the same level of output is called
A) a budget line. B) an isocost line C) an isoquant. D) an optimal input combination curve.
If a surplus exists in a market, then we know that the actual price is
a. above the equilibrium price, and quantity supplied is greater than quantity demanded.
b. above the equilibrium price, and quantity demanded is greater than quantity supplied.
c. below the equilibrium price, and quantity demanded is greater than quantity supplied.
d. below the equilibrium price, and quantity supplied is greater than quantity demanded.
How much is the output gap if short-run output is $18.0 trillion and potential output is $18.0 trillion?
What will be an ideal response?