Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be:
A. P3 and Y1.
B. P2 and Y1.
C. P2 and Y3.
D. P1 and Y2.
Answer: B
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
If the price level in Great Britain increases from 102 to 105 (holding all else constant), real wealth ________ and there is a movement ________ along Great Britain's aggregate demand curve
A) decreases; upward B) increases; upward C) decreases; downward D) increases; downward
Expected utility is the utility that arises from expected wealth
Indicate whether the statement is true or false
If you were in the donut-making business, which of the following would most likely not be an explicit cost?
a. salaries b. sales taxes c. utilities, such as gas and electricity d. insurance e. the time you put into running the business