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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________ economics prescribes what an individual or society ought to do
A) Normative B) Behavioral C) Positive D) Negative
The actual unemployment rate can be greater than or less than the natural rate of unemployment
Indicate whether the statement is true or false
Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands rises above the minimum of its average variable cost, but still lies below the minimum of average total cost, in the short run the firm will
a. experience losses but will continue to produce rubber bands. b. shut down. c. earn both economic and accounting profits. d. raise the price of its product.
What is a situation that makes the market behave inefficiently?
What will be an ideal response?