Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential
B. recessionary; higher; potential
C. recessionary; lower; lower
D. expansionary; higher; higher
Answer: A
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A) reinforces the substitution effect. B) lowers the opportunity cost of labor. C) raises the opportunity cost of labor. D) influences a person to work less as the wage rate increases.
A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars
a. True b. False Indicate whether the statement is true or false
According to the text discussion of efficient capital markets, which of the following would a well-trained economist recognize as logical and expected?
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A. higher price level and lower level of output. B. lower price level and lower level of output. C. higher price level and higher level of output. D. lower price level and higher level of output.