Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary
B. B; no output
C. B; expansionary
D. A; a recessionary
Answer: A
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Economists agree that a monopolistically competitive market structure
A) can eliminate any excess capacity if all firms in the industry devote more funds to differentiating their products. B) lowers consumer utility because consumers pay a price higher than the marginal cost of production. C) is detrimental to society because it leads to a waste of scarce resources. D) benefits consumers because firms produce products that appeal to a wide range of consumer tastes.
Economic variables that generally turn down before a recession begins and turn back up before the recovery starts are called:
A) leading indicators. B) coincident indicators. C) lagging indicators. D) none of the above.
The short-run shutdown rule is to shut down if:
A. P > AVC. B. P < AVC. C. P > ATC. D. P < ATC.
Which of the following sets of circumstances is likely to provide the best evidence in support of the theory of efficiency wages?
a. Workers in the market are unskilled and not represented by a union, and their wage exceeds both the equilibrium wage and the minimum wage. b. Workers in the market are highly skilled and not represented by a union, and their wage exceeds the minimum wage. c. Workers in the market are highly skilled and represented by a union, and their wage exceeds the equilibrium wage. d. Employers in the market are known for reducing the workers' wage whenever they get an opportunity to do so.