What explanations have been offered to account for the Great Moderation?
What will be an ideal response?
Three possible explanations have been offered for this period of unprecedented economic stability. One is that everyone was extremely lucky and that the period from 1985 to 2007 was simply an exceptionally calm period. The second is that economies have become more flexible in absorbing external economic disturbances. And the third is that monetary policymakers have figured out how to do their job effectively.
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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
A ______ is a tax on imports.
Fill in the blank(s) with the appropriate word(s).
According to Figure 5.4, how many slices of pizza will one pizzeria be willing to supply at a market price of $1.50 a slice?
(A) 2,000 (B) 300 (C) 200 (D) 100
Crowding out will be greater
A) the less sensitive consumption spending is to changes in the interest rate. B) the further equilibrium GDP is below potential GDP. C) the more sensitive investment spending is to changes in the interest rate. D) if the economy is in recession, rather than at full employment.