The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending.
B. recessionary gaps.
C. expansionary gaps.
D. unemployment.
Answer: B
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When analyzing the impact of government consumption and taxes in an open economy, we assume that:
a. the reasons for changing fiscal policy are not important. b. government deficits are a problem for the domestic and international economy. c. governments always have a balanced budget. d. governments often do not coordinate their tax and spending policies with those of other nations.
The key goal of monetary policy is to..
What will be an ideal response?
Underemployment refers to
A. The same thing as unemployment. B. A person who is not able to use her full capabilities in her job. C. A discouraged worker. D. A person who is lazy and not working hard at her job.
Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower