Refer to Figure 13.2. Assume the economy is initially in equilibrium with real GDP equal to potential GDP
Other things equal, if the economy enters a recession and the government underestimates the severity of the recession when implementing fiscal policy, the output gap will ________ and the rate of inflation will ________ than if the government had correctly estimated the recession's severity. A) decrease less; decrease less
B) decrease more; decrease more
C) decrease more; decrease less
D) not change; not change
B
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Decreases in the NAIRU represent a:
A) leftward shift in the aggregate demand curve. B) leftward shift of the long-run aggregate supply curve. C) rightward shift of the long-run aggregate supply curve. D) rightward shift in the aggregate demand curve.
In recent decades, the union-nonunion hourly wage differential has
A) increased substantially. B) increased slightly. C) stayed the same. D) fallen significantly.