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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When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
A decrease in the brokerage commissions in the housing market from 6% to 5% of the sales price will shift the ________ curve for bonds to the ________, everything else held constant
A) demand; right B) demand; left C) supply; right D) supply; left
If a price floor is set below the current market clearing price, then
A) a surplus must immediately occur. B) a shortage must immediately occur. C) there will be incentives for black markets to develop. D) quantity demanded will remain equal to quantity supplied at the current market clearing price.
Whenever statements embodying values are made, we enter the realm of
A) positive economics. B) normative economics. C) microeconomics. D) macroeconomics.