Starting from long-run equilibrium, an increase in autonomous investment results in ________ output in the short run and ________ output in the long run.

The government often intervenes when private markets fail to provide an optimal level of certain goods and services. For example, the government imposes an excise tax on gasoline to account for the negative externality that drivers impose on one another. Why might the private market not reach the socially optimal level of traffic without the help of government?

In the last half of the 1990s, the usual short-run trade-off between inflation and unemployment did not arise because:

A. the Fed held interest rates constant. B. the federal government balanced its budget. C. the U.S. personal savings rate rose. D. productivity (and thus aggregate supply) grew faster than previously.