Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential
B. expansionary; lower; potential
C. expansionary; higher; potential
D. recessionary; lower; lower
Answer: A
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The situation in which actual output exceeds potential output
a. is impossible because all resources are employed to produce potential output b. is possible only in times of high unemployment c. is possible only if the unemployment rate is negative d. is possible only in the long run e. creates pressure for inflation
When the price of a good decreases:
A. the good becomes less expensive relative to other goods and the consumer's purchasing power increases. B. the good becomes less expensive relative to other goods and the consumer's purchasing power decreases. C. the good becomes more expensive relative to other goods and the consumer's purchasing power increases. D. the good becomes more expensive relative to other goods and the consumer's purchasing power decreases.
Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one year later he sold the 10 shares for $130 a share. Over the year, the price level increased from 140.0 to 147.0 . What is Harvey's before-tax real capital gain?
a. $1,300 - $1,000(1.05) and this is the gain he is to report on his income tax b. $1,300 - $1,000(1.05) but he is to report a $300 gain on his income tax c. $1,300 - $1,000(1.07) and this is the gain he is to report on his income tax d. $1,300 - $1,000(1.07) but he is to report a $300 gain on his income tax
Suppose that at 500 units of output marginal revenue is equal to marginal cost. The firm is selling its output at $5 per unit and average total cost at 500 units of output is $6. On the basis of this information, we:
A. can say that the firm should close down in the short run. B. can say that the firm can produce and realize an economic profit in the short run. C. cannot determine whether the firm should produce or shut down in the short run. D. can assume the firm is not using the most efficient technology.