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.

If you expect the inflation rate to be 4 percent next year and a one year bond has a yield to maturity of 7 percent, then the real interest rate on this bond is

A) -3 percent. B) -2 percent. C) 3 percent. D) 7 percent.

John paints the exterior of his house and, as a result, his neighbor Christine is able to sell her home for $5,000 more than she could have before. John's house painting:

a. creates a negative externality for Christine. b. shows John is a free rider. c. results in an efficient market outcome for both. d. creates a positive externality for Christine. e. was poorly done.