If potential output equals 8,000 and short-run equilibrium output equals 8,500, there is a(n) ________ gap and the Federal Reserve must ________ real interest rates in order to close the gap.
A. recessionary; not change
B. recessionary reduce
C. recessionary; raise
D. expansionary; raise
Answer: D
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
In the above figure, what is the equilibrium level of real consumption spending?
A) $3.0 trillion B) $0.0 trillion C) $1.0 trillion D) $2.0 trillion
Process innovation refers to:
A. development of new products. B. implementation of better methods of producing products. C. first discovery of new scientific principles. D. widespread imitation of innovations.
The demand for a productive resource is said to be "derived" because the demand for the factor:
A. Depends on the demand for the product it helps to produce B. Depends on the demand for a complementary factor C. Is derived from the state of the economy D. Is derived from government policy