Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.

A. expansionary; higher; higher
B. expansionary; higher; potential
C. recessionary; higher; potential
D. recessionary; lower; lower


Answer: B

Economics

You might also like to view...

A restriction on imports is likely to reduce further restrictions on trade

Indicate whether the statement is true or false

Economics

What is the impact of a $10 billion tax cut on consumer spending, if MPC is equal to 0.8?

a. $50 billion b. $40 billion c. $10 billion d. $20 billion

Economics

When OPEC raised the price of oil, it created a:

A. demand-pull inflation. B. cost-push inflation. C. demand-push inflation. D. cost-pull inflation.

Economics

If a competitive firm successfully adopts a better production technology ahead of the others, then:

A. Its product price will become lower than the others' B. Its average cost will become higher than the others' C. Its profits will become higher than the others' D. Its marginal revenue will become higher than the others'

Economics