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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When real interest rates in other countries rise relative to those the United States, all else held constant, we would expect the U.S. dollar to ________.
A. inflate B. depreciate C. appreciate D. deflate
In sequential games, an especially important part of strategic behavior is to:
A. "think backward, work forward." B. "think forward, work backward." C. "think forward, act backward." D. "think backward, act forward."
Interest rates that are adjusted for expected inflation are known as:
A. nominal interest rates. B. ex ante real interest rates. C. coupon rates. D. ex post real interest rates.
Collusion refers to a situation where rival firms decide to
A. agree with each other to set prices and output. B. cheat on each other. C. compete aggressively against each other. D. combine their operations and merge with each other.