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
Answer: B
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Rent-seeking behavior creates:
A. waste and inefficiency. B. waste, but is efficient. C. inefficiencies, but not waste. D. efficiency without waste.
Markets fail to allocate resources efficiently when
a. prices fluctuate. b. people who have property rights abuse their privileges. c. property rights are poorly enforced or not well established. d. the government refuses to intervene in private markets.
In a competitive market, the actions of any single buyer or seller will
a. discourage entry by competitors. b. influence the profits of other firms in the market. c. have a negligible impact on the market price. d. None of the above is correct.
In professional baseball, some players earn over $20 million per year, while the average salary is about $4 million per year. The most likely explanation for this is that:
A. the market for baseball players is a winner-take-all market. B. racial discrimination. C. the best players are 5 times better than the average player. D. owners are overspending on players' salaries.