In 2000, a major U.S. oil company began exploration off the southeastern coast of the United States. Suppose the company discovers huge reserves of natural gas. Using the aggregate demand/ aggregate supply model, predict what shifts will occur and what will happen to output and prices in both the long and short runs
The discovery of natural gas reserves will increase the resources that the economy has available, which will lead to an increase in both short-run and long-run aggregate supply. In both the long run and the short run, prices will fall and output will increase.
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
The wage-schooling locus is
A. downward sloping because education is generally productive. B. upward sloping because education is generally productive. C. horizontal because wages are unrelated to schooling. D. backward bending. E. vertical because education is a public good.