Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential
B. expansionary; lower; potential
C. expansionary; higher; potential
D. recessionary; lower; lower
Answer: A
You might also like to view...
According to Laffer (of the Laffer curve), the Kemp-Roth tax cut of 1981 should have caused
a. tax revenue to rise, and it did b. tax revenue to fall, and it did c. people to increase saving, and it did d. people to increase consumption spending, but it didn't e. tax revenue to rise, but it didn't
If there is an active surplus (+) of +$30 billion and an actual deficit (-) of -$40 billion, then:
a. The full employment deficit must be -$70 billion. b. The passive deficit (-) must be -$10 billion. c. The full employment deficit (-) must be -$30 billion d. The passive deficit (-) must be -$70 billion. e. The passive surplus (+) must be +$40 billion.
Which of the following is incorrect?
A. As the price level falls, the demand for money declines, the interest rate declines, and interest-rate-sensitive spending increases. B. As the U.S. price level rises, U.S. goods become relatively more expensive so that U.S. exports fall and U.S. imports rise. C. Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward-flexible prices, reduces the price level. D. When the price level increases, real balances increase and businesses and households find themselves wealthier and therefore increase their spending.
Which of the following workers would be most likely to work fewer hours as a result of a wage increase?
A. Farm worker B. Surgeon C. Lifeguard D. Bartender