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
You might also like to view...
Which of the following statements is FALSE about opportunity cost?
A) Cost is always foregone opportunity. B) Opportunity cost is the next best alternative. C) John wants a burger and fries. The concept of opportunity cost applies even though he has enough funds to buy both. D) Opportunity cost exists only for goods with monetary values.
The inflation associated with the oil embargoes of the 1970s resulted in:
a. reduced unemployment because aggregate demand increased. b. reduced unemployment because aggregate demand fell c. increased unemployment because aggregate demand increased. d. increased unemployment because aggregate demand fell. e. increased unemployment because aggregate supply fell.
Which rate is the rate lenders charge their most trustworthy business borrowers?
a. discount b. commercial c. prime d. LIBOR
Which one of the following best exemplifies the principal-agent problem in the employer- employee relationship?
A. A worker takes 20-minute coffee-breaks although the employer allots only 15 minutes for this purpose. B. A worker is on the job 50 hours per week although only 40 hours are required for promotion. C. A worker opts for early retirement in response to the firm's incentive plan. D. A worker's productivity is independent of the wage paid.