Starting from potential output, if firms become less optimistic about the future and decide to decrease their investment in new capital, then this will generate a(n) ________ gap and inflation will ________.
A. recessionary; decrease
B. recessionary; increase
C. expansionary; increase
D. expansionary; decrease
Answer: A
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Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as
A. long-run aggregate supply shifting leftward B. Short-run aggregate supply shifting downward C. Aggregate demand shifting rightward D. Aggregate demand shifting leftward
The branch of economics which studies how households and firms make choices, interact in markets, and how government attempts to influence their choices is called
A) microeconomics. B) positive economics. C) normative economics. D) macroeconomics.
If a company dumps pollution in the water and fishermen are hurt and if transactions costs are prohibitively high and efficiency is the most important criteria,
A. the company should be made liable for the damage. B. the company should be taxed enough so the government can keep the river clean. C. liability should be placed on the group that has the least cost of solving the problem. D. the company should be allowed to pollute because a river is not private property.
Economists are generally in support of:
A) government restrictions on trade. B) free international trade. C) tariffs to restrict trade. D) subsidizing exports.