The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B
B. recessionary; C
C. recessionary; A
D. expansionary; A
Answer: C
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When a market experiences a positive externality,
a. the demand curve does not reflect the value to society of the good. b. too much of the good is being produced. c. the government can internalize the externality by imposing a tax on the product. d. the private value is greater than the social value.
In 2009, Congress passed a bill that involved government spending increases and tax cuts with the purpose of stimulating the US economy. This policy is an example of
a. an automatic stabilizer
b. contractionary fiscal policy
c. expansionary fiscal policy
d. expansionary monetary policy.
A firm's revenue from selling its product minus the cost of inputs purchased from other firms is called:
A. investment. B. value added. C. production costs. D. profits.
An increase in the price of capital goods will
A. reduce the expected future marginal product of capital. B. increase the expected future marginal product of capital. C. increase the interest cost and the depreciation cost of capital. D. increase the interest cost but not affect the depreciation cost of capital.