In the long run
A) GDP > potential GDP.
B) unemployment is at its natural rate.
C) LRAS and SRAS lie on the same line.
D) the inflation rate is zero.
Answer: B
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The government wishes to close an inflationary gap by reducing real GDP by $400 billion. Assuming a tax multiplier of 4 and an income multiplier of 5, which of the following policy prescriptions would reduce the inflationary gap by $400 billion?
A. Decreasing government spending by $400 billion and increasing taxes by $400 billion. B. Decreasing government spending by $160 billion and decreasing taxes by $100 billion. C. Decreasing government spending by $40 billion and decreasing taxes by $40 billion. D. Decreasing government spending by $80 billion and keeping taxes the same.
Government can raise economic efficiency through all of the following policies, except:
A. Outlawing various forms of commercial deception B. Imposing pollution taxes on polluting firms C. Using tax money to subsidize goods with external benefits D. Fixing the prices of various resources and products
A Gini coefficient of 0.25 represents less inequality in income distribution than a Gini coefficient of 0.4.
Answer the following statement true (T) or false (F)
In the short run, if the stock of capital ________ there will be more depreciation
A) remains stable B) grows C) declines D) grows, declines, or remains stable