Starting from Long-Run Equilibrium, a Large Increase in Government Purchases

question 95

Multiple Choice

Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ______gap in the short run and ____inflation and ____output in the long run.

• A)expansionary; higher; potential
• B)expansionary; lower; potential
• C)expansionary; higher; higher
• D)recessionary; higher; lower

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Definitions:

Innocent Misrepresentation

A false statement made without knowledge of its falsehood, leading another to enter into a contract under mistaken beliefs, without intent to deceive.

Unilateral Mistake

An error made by one party in a contract, which may not automatically void the contract unless certain criteria are met.

Material Term

An essential clause or provision in a contract that significantly affects the rights and obligations of the parties involved.

Fraudulent Misrepresentation

A false statement made knowingly or recklessly with the intent to deceive and induce another to part with something of value or to surrender a legal right.