Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential
B. recessionary; higher; potential
C. recessionary; lower; lower
D. expansionary; higher; higher
Answer: A
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International trade is restricted because
A) there is an uneven distribution of benefits and costs of free trade. B) free trade creates an inefficient use of resources. C) free trade leads to higher costs. D) free trade stifles diversity and stability.
Refer to Figure 10-7. Suppose the price of Pilates sessions rise to $30 while income and the price of Yoga sessions remain unchanged. The income effect of this price change is represented by the movement from
A) A to B. B) B to C. C) D to B D) D to C.
As the marginal propensity to consume (MPC) increases, the spending multiplier:
a. increases. b. decreases. c. remains constant. d. becomes indefinable.
When L.L. Bean decides to increase its prices due to general inflation, they must reprint the millions of catalogs they produce and distribute. The costs associated with doing so in response to inflation are called:
A. menu costs. B. shoe-leather costs. C. tax distortions. D. printing costs.