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

Economics

Monetarists argue that the Federal Reserve should allow the money supply to grow:

a. counter to the business cycles. b. faster than 10 percent annually. c. only during recessions. d. at a constant rate.

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Economics

The 1997-1998 Asian crisis began as a crisis of confidence in China's financial system

a. True b. False

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Economics

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.