The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A
B. recessionary; C
C. recessionary; B
D. expansionary; A
Answer: D
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Soran is risk averse. If her wealth rises by $100, her total utility increases by 300. If her wealth increases, her total utility will decrease
A) by more than 300. B) by less than 300. C) by 300. D) by some amount that cannot be determined without more information.
All of the following is consistent with the classical theory of employment EXCEPT
A. The interest rate will equalize savings and investment. B. Everything produced will necessarily be purchased. C. Saving and investing are done by different people for different reasons. D. Wages and prices are flexible downwards.
A tax is progressive if the ratio of taxes to income rises as income rises
a. True b. False Indicate whether the statement is true or false
Suppose government finds it can increase the equilibrium real GDP $45 billion by increasing government purchases by $18 billion. On the basis of this information, we can say that the:
A. MPS in this economy is .4. B. MPC in this economy is .4. C. multiplier does not apply in this economy. D. multiplier is 3.