Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential
B. expansionary; higher; potential
C. recessionary; lower; potential
D. recessionary; lower; lower
Answer: C
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Refer to Exhibit 9-2. The economy is currently producing Q1. At this level of Real GDP, the economy is experiencing
a. a shortage in the labor market. b. a surplus in the labor market. c. neither a shortage nor a surplus in the labor market. d. all of the above are equally likely
The value of the marginal product of a resource is equal to:
a. the marginal revenue of the firm, if the product market is perfectly competitive. b. the market price of the product divided by the price of the resource. c. the market price of the product divided by the marginal product of the resource. d. the marginal revenue product of the resource, if the product market is perfectly competitive. e. the marginal product of the resource divided by the price of the resource.
The economy is in a recessionary gap and there is evidence that the economy is in a liquidity trap. In this situation, a Keynesian is likely to advocate the use of __________ policy
A) expansionary fiscal B) contractionary fiscal C) expansionary monetary D) contractionary monetary
Direct controls are generally much more costly than emissions taxes because
A. under direct controls emissions cutbacks are usually not apportioned among the firms on the basis of their ability to reduce pollution cheaply and efficiently. B. emissions tax per unit of output is higher than the per-unit direct control program cost. C. government cannot legally levy emissions taxes that are as high. D. firms disregard emissions taxes.