Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential
B. higher; potential
C. higher; higher
D. lower; higher
Answer: B
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In a study of whether prices are sticky or not, Alan Blinder supervised interviews of corporate executives on the frequency with which their firms change prices and found that
a. 55 percent of firms changed prices only once a year or less. b. over 20 percent of the firms changed prices more than 12 times per year. c. 10 percent of companies changed prices 4 to 12 times per year. d. there is not a considerable departure from auction-market behavior.
A big problem with fair pricing schemes is that
a. output is lower than if the market were competitive b. prices are higher than if the market were competitive c. firms have no incentive to control costs d. efficiencies result from lack of profit motive e. the marginal cost may not be very low
Demand is said to be inelastic if
a. buyers respond substantially to changes in the price of the good. b. demand shifts only slightly when the price of the good changes. c. the quantity demanded changes only slightly when the price of the good changes. d. the price of the good responds only slightly to changes in demand.
Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:
A. confused association and causation. B. misunderstood the Ceteris paribus assumption. C. used normative economics to answer a positive question. D. built an untestable model.