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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A firm is more likely to engage in horizontal foreign direct investment if
A) trade costs are high and there are internal economies of scale. B) trade costs are low and there are internal economies of scale. C) trade costs are high and there are external economies of scale. D) trade costs are low and there are external economies of scale. E) trade costs are low and firms experience constant returns to scale in production.
If the money supply grows faster than the rate of growth in GDP
A) prices fall. B) interest rates fall. C) prices rise. D) none of these choices.
When two goods are perfect substitutes, the marginal rate of substitution
a. decreases as the scarcity of one good increases. b. is constant along the indifference curve. c. changes to reflect the consumer’s changing preferences for the goods. d. increases as the scarcity of one good increases.
Which of the following is the correct sequence of events for this graph?
a. Q1 moves to QSR; Q1 moves to QLR; P1 moves to P2 b. Q1 moves to QSR; P1 moves to P2; Q1 moves to QLR c. P1 moves to P2; Q1 moves to QLR; Q1 moves to QSR d. P1 moves to P2; Q1 moves to QSR; Q1 moves to QLR