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
Answer: A
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If production of a good produces an external benefit, in order for the marginal social cost to equal the marginal social benefit
A) the good should be taxed. B) permits should be required to purchase the good. C) the good could be subsidized. D) the government needs to take no action.
An inverted yield curve predicts that short-term interest rates
A) are expected to rise in the future. B) will rise and then fall in the future. C) will remain unchanged in the future. D) will fall in the future.
For all employee earnings subject to Social Security taxes, what is the current Social Security tax rate for employees?
A) 0.8% B) 2.9% C) 4.2% D) 6.2%
According to your text, during the 2000s, the inflation rate was in which range of percentages?
A) 0-5% B) 5-10% C) 10-15% D) 15-20%