The natural monopoly in Figure 13.3 wants to produce:

Which of the following is true of expected inflation?

a. It increases the efficiency of the economy. b. It is more of a problem than unexpected inflation. c. It results in lower prices over time as people make adjustments. d. It is not a major problem if people can make the right interest rate and income level adjustments. e. It is necessarily tied to a decline in purchasing power.

Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.

A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary