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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Assume that there is a 25% reserve requirement and that the Federal Reserve buys $200 million worth of government securities. If the securities are purchased from the public, then this action has the potential to increase bank lending by a maximum of ________.
A. $800 million, and also by $800 million if the securities are purchased directly from commercial banks B. $600 million, and also by $600 million if the securities are purchased directly from commercial banks C. $800 million, but only by $600 million if the securities are purchased directly from commercial banks D. $600 million, but by $800 million if the securities are purchased directly from commercial banks
Analysts have attempted to model the impact of monetary policy on net worth by emphasizing
A) the impact of lower interest rates on business spending on fixed investment. B) the impact of lower interest rates on household spending on housing and durable goods. C) the liquidity of balance sheet positions as a determinant of business and household spending. D) the greater variability of business spending compared to household spending.
Taxes provide individuals with incentive to:
(a) Increase the number of working hours. (b) Increase productivity by working longer and harder. (c) Direct resources to uses where taxes are relatively low or nonexistent. (d) Buy and save more.
In contrast to private goods, public goods such as public radio are such that one person's consumption ________ diminish the amount available to others, and those who supply the public good ________ exclude those who do not pay
a. does; can b. does not; can c. does; cannot d. does not; cannot