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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The Coase Theorem points out that externality problems can be eliminated if the number of parties involved is small and if property rights
A) are granted solely to consumers. B) are granted solely to producers. C) are eliminated. D) are granted to either consumers or producers and transactions costs are low.
A federal system of governments can limit the problems posed by special interests because _____
a. it provides voters with other governments to compare to their own b. it increases the number of legislatures to oversee the bureaucracies c. it decreases rational ignorance d. b and c
In the basic 45-degree line model, what is the effect of an increase in the price level?
a. There will be movement to the left on the expenditure line. b. There will be movement to the right on the expenditure line. c. The expenditure line will shift downward. d. The expenditure line will shift upward.
Gasoline and motel rooms are complements for many consumers. When the price of gasoline declines, consumers take longer vacations and rent more motel rooms. Therefore, the cross price elasticity between gasoline and motel rooms is
A. positive. B. more than one because both are luxuries. C. less than one because neither is a luxury. D. negative.