Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary
B. B; no output
C. B; expansionary
D. A; a recessionary
Answer: A
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Suppose the own price elasticity of demand for good X is ?0.5, and the price of good X increases by 10 percent. What would you expect to happen to the total expenditures on good X?
A. Increase B. Remain unchanged C. Decrease D. Neither increase, decrease, nor remain unchanged
An implicit cost is
A) a nonmonetary opportunity cost. B) a cost unique to sole proprietorships. C) a cost that involves spending money. D) a cost unique to corporations.
There is great concern over the fact that global warming is causing permanent damage to the global environment. A study of the costs and benefits of purchasing carbon offsets to combat global warming is an example of
A. normative economics. B. laissez-faire economics. C. labor economics. D. positive economics.
Refer to Figure 16-4. In the graph above, suppose the economy is initially at point A. The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by Congress and the president?
A) an increase in the marginal income tax rate B) an increase in interest rates C) an increase in transfer payments D) an open market purchase of Treasury bills