When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline
B. increase; raise; decline
C. decline; lower; expand
D. decline; raise; decline
Answer: C
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How would the following events affect the market demand for laser printers?
a) A recession in the economy leading to a fall in income levels b) A five-fold increase in the price of printing paper
In the ________ range of the aggregate supply curve, expansionary fiscal policy causes aggregate ________ to increase, which results in a higher price level and a higher equilibrium level of real GDP
a. intermediate, demand b. classical, demand c. Keynesian, supply d. intermediate, supply
Crowding out is caused by
A. A decline in overall spending. B. A decline in tax revenues. C. An increase in government borrowing. D. An increase in consumer spending.
A farmer notices that a neighboring rancher's cattle are wandering and destroying some of his crops. The farmer decides to offer a payment to the rancher if the rancher will reduce the size of his herd. By doing so, the farmer
A. indicates to the rancher that there is an opportunity cost to the wandering of the cattle, and thereby internalizes the externality. B. can be sure that the size of the herd will be reduced and the size of his own harvest will be increased. C. inadvertently bears the costs of the externality when the rancher should be liable for the costs. D. informs the rancher that the cattle have destroyed crops, which should induce the farmer to build a fence in order to maintain good relations.