As the level of real GDP increases, the short-run aggregate supply curve:
a. shifts to the right.
b. shifts to the left.
c. becomes flatter.
d. becomes steeper.
e. becomes horizontal to the real GDP axis.
d
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
If the expenditures multiplier in an economy is 3 and the government wants to increase aggregate demand by $12 billion at all price levels, it should cut taxes by
A. $9 billion. B. $12 billion. C. $6 billion. D. $3 billion.
Four stores have a problem with theft and security is a public good. Let S stand for the number of person-hours of security patrols per week. The marginal benefit of security patrols to each of the stores is given by the formula MB = 200 - 2S. Patrols cost $20 per hour. What is the socially efficient level of security?
A. 90 person-hours of patrols per week B. 100 person-hours of patrols per week C. 92.5 person-hours of patrols per week D. 97.5 person-hours of patrols per week
Suppose that the quantity of chain saws sold increased from 200 to 400 when the price fell from $225 to $175 . Over this price range, the absolute value of the price elasticity of demand for chain saws is
a. 0.25. b. 0.375. c. 1.0. d. 2.67. e. 4.0.