Refer to Figure 13.2. Assume the economy is initially in equilibrium with real GDP equal to potential GDP
Other things equal, if the economy enters a recession and the government underestimates the severity of the recession when implementing fiscal policy, the output gap will ________ and the rate of inflation will ________ than if the government had correctly estimated the recession's severity. A) decrease less; decrease less
B) decrease more; decrease more
C) decrease more; decrease less
D) not change; not change
B
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Government support of basic research by funding scientists through the National Science Foundation is an example of a government policy to promote economic growth by:
A. increasing human capital. B. increasing physical capital. C. increasing the availability of natural resources. D. improving technology.
In the above figure, what will be the output level produced if average cost pricing is used?
A) 1,200 B) 900 C) 700 D) somewhere between 900 and 1,200
Julie always purchases the soda with the lowest price. For Julie, the cross price elasticity of demand for brand X and brand Y will be
A) equal to 0. B) negative. C) positive. D) impossible to determine without more information.
According to the Phillips curve, what is the relationship between unemployment and inflation?
a. There is no relationship. b. There is a direct relationship. c. There is an inverse relationship. d. There is an equilibrium relationship.