Examples of market failure include lack of competition, externalities, public goods, and income inequality
a. True
b. False
Indicate whether the statement is true or false
True
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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
The ability of a commercial bank to increase the money supply is limited by the
A) availability of eligible borrowers and the bank's reserves in relation to legal reserve requirements. B) demand of the public for liquidity. C) eligibility of the bank for currency drafts and its ratio of M2 to M1. D) willingness of customers to withdraw currency for circulation.
Planned aggregate expenditure (PAE ) equals:
A. C + I p + G + NX. B. C + I + G + NX p. C. C p + I + G + NX. D. C + I + G p + NX.
Assuming full employment is at the intersection of AD3 with the aggregate supply curve for the economy depicted in Figure 8.7, the worst unemployment problem would exist when AD is located at
A. AD1. B. AD2. C. AD3. D. AD5.