An inflationary gap exists when the macro economy is in equilibrium at more than the potential output of the economy because aggregate demand is so high that the economy is operating temporarily beyond its long-run capacity.In other words, the AD=AS occurs to the right of the vertical long-run supply curve.

Which of the following is correct? i. U.S. total surplus decreases when the United States exports a good. ii. U.S. total surplus decreases when the United States imports a good. iii. U.S

total surplus increases when the United States imports a good and when it exports a good. A) i only B) iii only C) i and ii D) ii only E) None of the above because the U.S. total surplus does not change as a result of trade

The principle of diminishing marginal utility can be used to explain why

A) Bob's second soda is less enjoyable than his first soda. B) Bob's first soda is less enjoyable than his second soda. C) Charlie enjoys his fourth soda less than Bob enjoys his first. D) Bob enjoys his first soda more than Charlie enjoys his fourth.