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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When we compare PAE and actual output (Y) if PAE is greater than Y we expect that:
A. inventories to increase. B. inventories to decrease. C. there will be no change in inventories. D. the government will spend more than it has collected in taxes.
In the U.S., from the early 1980s through the early 1990s,
a. both inflation and nominal interest rates rose. b. both inflation and nominal interest rates fell. c. the inflation rate fell and the nominal interest rate rose. d. the inflation rate rose and the nominal interest rate fell.
If producers must receive a higher price to be induced to produce any quantity, we can conclude that
A) supply decreased. B) demand decreased. C) both supply and demand increased. D) demand increased.
Suppose that on average there are four more car accidents for every extra inch of snowfall in a certain region. If snowfall is graphed on the y axis and car accidents on the x axis, then if we graph this relationship, the slope of the line will be
A. 1/4. B. 1/3. C. 4. D. 3.