Recent research estimates that the short-run price elasticity of demand for gasoline in the U.S. is -0.3, and the long-run price elasticity of demand is -1.4. What happens if the government increases the federal gasoline tax?
A . Consumer expenditures on gasoline decrease over the short run and long run.
B. Consumer expenditures on gasoline increase over the short run and decline over the long run.
C. Consumer expenditures on gasoline decline over the short run and increase over the long run.
D. Consumer expenditures on gasoline increase over the short run and long run.
B. Consumer expenditures on gasoline increase over the short run and decline over the long run.
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Over time in a growing economy, the long-run aggregate supply curve will
A) become horizontal at the long-run potential price level. B) shift rightward. C) shift leftward. D) become increasingly steep.
In the short run, an increase in government expenditure will...
I. shift the aggregate demand curve rightward II. increase real GDP III. increase the government expenditure multiplier IV. increase the tax multiplier a) I & II b) I & III c) I, II, & III d) III & IV