An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase
B. increase; increase
C. decrease; decrease
D. increase; decrease
Answer: D
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When an average cost pricing rule is imposed on a natural monopoly, ________
A) total surplus is maximized and the monopoly incurs an economic loss B) the monopoly makes zero economic profit C) the monopoly makes an economic profit D) total surplus is maximized and the monopoly makes an economic profit
The free-rider problem exists because it is difficult to ______.
a. share the benefits of some products with everyone b. prevent everyone from gaining the benefits of some products c. produce products that satisfy everyone d. produce products that satisfy anyone
The tendency for inflation to change relatively slowly from year to year in industrial countries is called:
A. potential inflation. B. inflation inertia. C. inflation expectations. D. the inflation gap.
In the Keynesian model, an increase in government purchases affects output by
A. increasing the real interest rate due to crowding out, reducing aggregate demand. B. increasing aggregate demand as national saving declines. C. increasing saving to pay for future taxes, lowering the real interest rate and shifting the IS curve to the left. D. increasing labor supply, because workers feel effectively poorer.