When external costs are present and government imposes a tax equal to the external marginal cost, then efficiency can be achieved

According to the misperceptions theory, short-lived shocks may have long-term effects on the economy because of

A) multiplier effects. B) propagation mechanisms. C) accelerator effects. D) automatic stabilizers.

An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.

A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease