Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential
B. expansionary; higher; potential
C. recessionary; lower; potential
D. recessionary; lower; lower
Answer: C
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A perfectly competitive firm maximizes its profit by producing the level of output so that its average total cost equals the market price
Indicate whether the statement is true or false
In the last twenty-five years, the Yen and German mark and now the Euro have
a. fluctuated widely against the dollar b. appreciated against the dollar and then depreciated against the dollar c. exchanged without restrictions d. all of the above e. none of the above
What effect did the Iraqi invasion of Kuwait have on the U.S. economy?
a. A rightward shift of the aggregate demand curve b. It had no effect c. A downward shift of the aggregate supply curve d. A leftward shift of the aggregate demand curve e. An upward shift of the aggregate supply curve
To reconcile the difference between GNP and national income, the U.S. Department of Commerce (which calculates these things)
a. adds depreciation of capital and nonfactor charges to national income b. adds depreciation of capital to and subtracts indirect business taxes from national income c. subtracts depreciation of capital and indirect business taxes from national income d. subtracts depreciation of capital from and adds indirect business taxes to national income e. subtracts depreciation of capital and indirect business taxes from GDP