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; higher; potential
C. recessionary; lower; lower
D. expansionary; lower; potential


Answer: A

Economics

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Why is the principal-agent problem less likely when getting a haircut than when getting a car repaired?

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Referring to Figure 18.2, the peso is likely to depreciate if the exchange rate is either ________ or ________ pesos to the dollar.

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