Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential
B. expansionary; lower; potential
C. expansionary; higher; potential
D. recessionary; lower; lower
Answer: A
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Rising nominal GDP will increase the demand for money and short-term interest rates
Indicate whether the statement is true or false
The saving rate has the following characteristic in Solow's exogenous growth model
A) it increases with output. B) it first decreases, then increases with output. C) it first increases, then decreases with output. D) it is constant.
At the profit-maximizing level of output, marginal profit
A) is also maximized. B) is zero. C) is positive. D) is increasing. E) may be positive, negative or zero.
For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?
a. The opportunity cost of producing watches is higher in Denmark. b. The opportunity cost of producing cheese is higher in Denmark. c. The opportunity cost of producing cheese is identical in both countries. d. It is impossible to compare opportunity costs because the two countries use different currencies. e. In both countries combined, the opportunity cost of one watch is 150 pounds of cheese.