The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A
B. recessionary; C
C. recessionary; B
D. expansionary; A
Answer: D
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Refer to the above figure. The top two arrows of the figure refer to the product markets. The bottom arrows refer to the factor markets. Which arrow represents total income?
A) Arrow A B) Arrow B C) Arrow C D) Arrow D
Inflation reduces the return to capital gains _____
a. only on large assets such as houses b. because people have to pay taxes on nominal capital gains c. when tax rates on capital gains are high d. only under hyperinflation
If the market ratio of silver to gold is 16 to 1 and the mint ratio is 15 to 1,
a. people will cease to use gold and silver as money. b. the Treasury will be forced to issue paper money. c. gold is undervalued at the mint. d. silver is undervalued at the mint.
If a Pigovian tax is too large, the resulting:
A. quantity will be too high. B. outcome will not maximize surplus. C. outcome will still be efficient. D. All of these statements are true.