Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.

Figure 10.4 Federal Surplus or Deficit as a Percent of GDP

What will be an ideal response?

When dealing with externalities, how can we correct market failure?

a) In the case of negative externalities, the market can correct it, but in the case of positive externalities, government regulation is necessary. b) In the case of positive externalities, the market can correct it, but in the case of negative externalities, government regulation is necessary. c) In the case of both positive and negative externalities, market can correct all market failures. d) In the case of both positive and negative externalities, government regulation is necessary to induce market participants to internalize the externality.