Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential
B. expansionary; higher; potential
C. recessionary; lower; potential
D. recessionary; lower; lower
Answer: C
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The table contains data for a hypothetical single-product economy. Nominal GDP in year 3 is
A. $100. B. $225. C. $450. D. $150.
Falling interest rates can
A) raise the cost of buying new homes and fewer new homes will be purchased. B) lower the cost of buying new homes and fewer new homes will be purchased. C) raise the cost of borrowing for firms and decrease investment. D) increase a firm's stock price, which causes firms to issue more stock shares, and thus increases funds for investment.
Which of the following policies would be most likely to reduce the rate of inflation?
a. sale of government bonds by the Federal Reserve b. a reduction in the discount rate c. an increase in the size of the federal budget deficit d. a reduction in the required reserves imposed on the banking system
Most spells of unemployment are short, and most unemployment observed at any given time is long term. How can this be?