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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According to the quantity theory of money, if the money supply grows at 6%, real GDP grows at 2%, and the velocity of money is constant, then the inflation rate will be
A) 8%. B) 6%. C) 4%. D) 2%.
The net effect of a devaluation on economic growth depends on the mix of capital and labor utilized in the nation's export industries
Indicate whether the statement is true or false
A thin market usually does not allow the use of futures contracts or other hedging tools
Indicate whether the statement is true or false
Under a fixed exchange rate regime, an expansionary fiscal policy would ____ interest rates and GDP, which would cause ____ pressure on the exchange rate, forcing the monetary authority to undertake a(n) ______ monetary policy.
A) raise; downward (appreciation); expansionary B) lower; upward (depreciation); contractionary C) raise; upward (depreciation); contractionary D) lower; downward (appreciation); expansionary