Economic growth is:
A. a result of having more natural resources, land or capital.
B. an increase in our economy's potential output.
C. represented by the long-run aggregate supply curve shifting to the right.
D. All of these are true.
Answer: D
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The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B B. recessionary; C C. recessionary; A D. expansionary; A
Suppose the actual federal funds rate is equal to the rate implied by a particular inflation goal. In this situation, the Taylor rule implies that
A) monetary policy will tend to produce that inflation rate. B) monetary policy is contractionary. C) monetary policy is expansionary. D) fiscal policy will result in a balanced budget.
A firm that wished to calculate the present value of its future nominal profits should use the ____ to do so
a. real interest rate b. nominal interest rate c. nominal interest rate minus the expected inflation rate d. real interest rate minus the expected inflation rate
Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be:
A. P3 and Y1. B. P2 and Y1. C. P2 and Y3. D. P1 and Y2.