Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential
B. expansionary; higher; potential
C. recessionary; lower; potential
D. recessionary; lower; lower
Answer: C
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The figure above shows the market for cotton in Georgestan. The government regulates the market with a production quota set at 8 million pounds per year. The introduction of the quota has
A) not affected the level of cotton production in Georgestan. B) increased the production of cotton in Georgestan by 8 million pounds. C) decreased the production of cotton in Georgestan by 4 million pounds. D) decreased the production of cotton in Georgestan by 8 million pounds.
The federal budget deficit: a. becomes less prominent during and after each recession
b. forces the government to issue Treasury bonds. c. decreases the growth rate of the U.S. GDP. d. is common when total federal revenue exceeds total federal outlay.