Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential
B. higher; potential
C. higher; higher
D. lower; higher
Answer: B
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Under a fixed exchange rate system, if the inflation rate in the United States is 5 percent a year and the inflation rate in Australia is 0 percent a year, then the U.S. real exchange rate will
A) increase 5 percent a year. B) decrease 5 percent a year. C) remain constant. D) possibly increase or decrease.
If the exchange rate between the U.S. dollar and the Indian rupee (rupees per dollar) is greater than the relative purchasing power between the two countries, which of the following would be true?
A) There are opportunities for profit by purchasing goods in India and then selling them in the United States. B) Purchasing power parity predicts that the value of the dollar will rise as traders take advantage of arbitrage opportunities. C) There are no arbitrage opportunities for which traders can take advantage. D) Purchasing power parity predicts that the dollar is undervalued as traders take advantage of arbitrage opportunities.
Regulations that reduced competition between banks included
A) branching restrictions. B) bank reserve requirements. C) the dual system of granting bank charters. D) interest-rate ceilings.
Which of the following is most likely to be a monopoly?
A) AOL (America On Line), an Internet service provider B) WABC, a television station C) The Washington Post D) a public water utility