If there is currently an inflationary gap: a. The price level ...

[Ebrown]

If there is currently an inflationary gap:
 a. The price level will tend to rise.
  b. Real output will tend to rise.
 c. Both a. and b. will occur.
 d. None of the above will occur.

Question 2

Which of the following correctly explain Ricardian equivalence?
 a. Government spending that is financed by borrowing has a smaller effect on the economy than government spending financed by raising taxes.
  b. Consumers do not base current spending on future expected tax liabilities.
  c. Government borrowing can function like increased current taxes, reducing current household and business expenditures.
  d. The government should balance its budget by equating revenue and expenditure in every fiscal year.
  e. Government spending does not crowd out private investment.

[shailee]

Answer to Question 1

a

Answer to Question 2

c