As the dollar price of the euro increases
A. the demand for euros will increase.
B. the price of French goods will fall for U.S. residents.
C. U. S. residents will increase their travel to France.
D. French residents will purchase more U.S. goods.
Answer: D
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Refer to the graph below. Assume that the economy is initially in equilibrium at the intersection of AD1 and AS1. Suppose that there is economic growth which shifts AS1 to AS2. Mainstream economists would suggest that the application of a monetary rule to keep prices constant might produce demand-pull inflation because the investment spending might:
A. Increase and cause the aggregate demand curve to shift from AD1 to AD4
B. Decrease and cause the investment demand curve to shift from AD1 to AD4
C. Increase and cause the aggregate demand curve to shift from AD1 to AD2
D. Decrease and cause the investment demand curve to shift from AD1 to AD2
Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower