Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential
B. expansionary; higher; potential
C. recessionary; lower; potential
D. recessionary; lower; lower
Answer: C
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When discussing issues of pollution, it is clear that
A) since polluters are harming other people they must be made to stop polluting. B) we can easily delineate who is the victim and who is the villain. C) the most efficient amount of pollution is no pollution at all. D) None of the above are true.
According to traditional Keynesian economics, expansionary fiscal policy initiated by the federal government
A) is never appropriate. B) is an appropriate way to prevent recessions and depressions. C) is an appropriate way to slow down an over-heated economy. D) will always fail due to crowding out effects.
High-wage workers are
A. more likely than low-wage workers to supply more labor when the wage rate rises. B. about as likely as low-wage workers to supply more labor when the wage rate rises. C. less likely than low-wage workers to supply more labor when the wage rate rises. D. about as likely as low-wages workers to supply less labor when the wage rate rises.
You own a car dealership and pay all of your sales people a flat salary. As a result, they don't work very hard to generate sales. This is an example of
A. an externality. B. adverse selection. C. logrolling. D. moral hazard.