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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Fractional reserve banking refers to a banking system in which
A) bank deposits are less than bank reserves. B) bank reserves are only a fraction of total deposits. C) bank reserves are only a fraction of required reserves. D) bank loans are less than bank reserves.
Inferior goods are low quality goods that people prefer to buy less of
a. True b. False Indicate whether the statement is true or false
Is it possible for a country to run a trade deficit and yet have the value of its currency not change? Use a supply and demand model of a foreign exchange market to explain how this could occur.
What will be an ideal response?
Could an increase in the demand for compact cars give an American automobile producer a comparative advantage in their production?
A) No, because comparative advantage depends entirely on productive capabilities. B) No, because changes in demand can only affect the price of compact cars. C) Yes, but only if it leads to a change in the techniques of production. D) Yes, by making compact-car production more profitable.