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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If the price of a product increases, we would expect
A) the level of demand to decrease. B) quantity supplied to increase. C) the level of supply to increase. D) an increase in quantity demanded.
If the firms in a monopolistically competitive market are earning short-run economic profits, then
a. each existing firm will increase output in the long run as its marginal revenue curve shifts rightward b. each firm will experience an increase in the demand for its output in the long run c. each firm's profit will drop to normal in the long run as its demand curve shifts leftward due to entry of new firms d. barriers to entry will enable them to earn economic profits in the long run e. decreased demand for a key input will reduce that input's price in the long run and lower each firm's average total cost curve
A French worker can produce either 4 barrels of wine or 16 shirts a week; and Italian worker can produce either 10 barrels of wine or 20 shirts a week.
A. After the countries begin to trade, one barrel of wine will cost between four and eight shirts. B. France has an absolute advantage in both wine and shirts. C. France will export shirts and import wine. D. France has an absolute advantage in making shirts.
If a natural disaster were to cause a negative long-run supply shock to the economy, once the economy adjusts, the new equilibrium will be at a:
A. higher price level and lower level of output. B. lower price level and lower level of output. C. higher price level and higher level of output. D. lower price level and higher level of output.