A recessionary gap exists when the equilibrium level of GDP
A. falls short of potential GDP.
B. equals potential GDP.
C. exceeds potential GDP.
D. causes inventory levels to fall.
Answer: A
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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
Today the greatest number of poor are _________ Americans, but the poverty rate for __________ Americans is higher.
A. white; black and Hispanic B. black; white C. black; Hispanic D. white; Hispanic
The monetary and fiscal stimulus response to the Great Recession resulted in an immediate increase in real GDP
a. True b. False Indicate whether the statement is true or false
Which of the following concepts does not represent basic trade-offs faced by a government?
A. The Phillips curve. B. Fine-tuning. C. Opportunity costs. D. The production possibilities curve.