When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.

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

Which of the following is true of a change in dividend payments?

A. There is no substitution effect because a change in dividend payments does not change the trade-off between work and leisure. B. There is no substitution effect because a change in dividend payments does not change a household's permanent income. C. There is no income effect because a change in dividend payments does not change the trade-off between work and leisure. D. There is no income effect because a change in dividend payments does not change a household's permanent income.