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
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The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as
A) risk sharing. B) risk aversion. C) risk neutrality. D) risk selling.
Regressive tax systems are bad.
A. True B. False C. Uncertain
Holding supply constant, a reduction in demand leads to
A. lower prices and lower quantity supplied. B. higher prices and higher quantity supplied. C. higher prices and lower quantity supplied. D. lower prices and higher quantity supplied.
A classical model of the economy predicts
A. a negative unemployment rate whenever the economy is in equilibrium. B. full employment in the long run. C. cyclical changes in the unemployment rate. D. the same unemployment rates as the Keynesian model.