Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential
B. recessionary; higher; potential
C. recessionary; lower; lower
D. expansionary; higher; higher
Answer: A
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Which of the following best describes the "interest rate effect"?
A) An increase in the price level lowers the interest rate and chokes off investment and consumption spending. B) An increase in the price level lowers the interest rate and chokes off government spending. C) An increase in the price level raises the interest rate and chokes off government spending. D) An increase in the price level raises the interest rate and chokes off investment and consumption spending.
Explain why a government would impose an import tariff when domestic consumers suffer more than producers gain
What will be an ideal response?