Suppose the cost of producing two goods, x and y, can be represented as C = ax + by + cxy. If the measure of economies of scope, SC, is zero, then which of the following must be TRUE?

Which of the following is correct?

a. IM + X = G ? T b. I + G + T = S + X ? M c. I + G + X = S + T + IM d. I + T + G = S ? X ? IM

When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.

A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline