Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output
B. D; an expansionary
C. B; recessionary
D. D; a recessionary
Answer: D
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
Inflation is an increase in the overall price level in the economy
a. True b. False Indicate whether the statement is true or false
Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below.
If the government provides a subsidy of $500 per ton, then producer surplus will be ________ per day.
A. $1,000 B. $8,000 C. $4,000 D. $0
Which of the following goods' prices are not considered when calculating core inflation?
A. entertainment B. clothing C. housing D. food