An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase
B. increase; increase
C. decrease; decrease
D. increase; decrease
Answer: D
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Consider the following:
(i) Silver is more abundant and easier to extract from some mines than from others. Is silver mining more likely to be a constant-cost or an increasing-cost industry? Justify your choice. (ii) Production of flags requires nylon, sewing machines, and unskilled labor. Is flag production more likely to be a constant-cost or an increasing-cost industry? Justify your choice. (iii) Farmers make up a significant proportion of the demand for arable land. Is farming more likely to be a constant-cost or an increasing-cost industry? Justify your choice.
You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $500 billion, (2) investment = $50 billion, (3) government purchases = $100 billion, and (4) net exports = $20 billion. If the full-employment level of GDP for this economy is $620 billion, then what combination of actions would be most consistent with closing the GDP-gap here?
A. An increase in government purchases and a decrease in taxes B. A decrease in government purchases and taxes C. An increase in government purchases and taxes D. A decrease in government purchases and an increase in taxes
The time it takes for an additional dollar of net government expenditures to work its way through the economy and have its full effect
A) is about one quarter of a year. B) is between one and two years. C) is not yet known precisely because little empirical research has been done on the question. D) probably cannot be predicted from an examination of historical data.
On average across the world, the underground economy is worth about:
A. one-half of GDP. B. one-tenth of GDP. C. one-quarter of GDP. D. one-third of GDP.