Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C
B. B; C
C. B; A
D. D; B
Answer: D
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What will happen to the steady-state equilibrium level of output and capital stock in an economy if:
a) there is an increase in the savings rate. b) there is a deterioration of human capital. What will be an ideal response?
Fiat money
A) serves well as a medium of exchange, but not as a store of value. B) has no or very little value except as money. C) is rarely used in modern economies. D) functions well only if can be redeemed for gold or other precious metals.
Input demand functions that are calculated from profit functions differ from those calculated from cost functions because:
a. they assume cost-minimization. b. they hold output constant. c. they assume output price is constant. d. they assume output is set at its profit-maximizing level.
SNAP (food stamps) and Medicaid are examples of:
a. money transfers b. resource earnings c. in-kind transfers d. tax expenditures