FIGURE 24-2 -Refer to Figure 24-2.Suppose the Economy Is in a Short-Run

question 80

Multiple Choice

FIGURE 24-2
-Refer to Figure 24-2.Suppose the economy is in a short-run equilibrium at Y₁.An appropriate fiscal policy for closing the output gap is

• A)a decrease in personal income taxes.
• B)a decrease in government purchases.
• C)an increase in current interest rates.
• D)an increase in government purchases.
• E)a decrease in corporate income-tax rates.

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Definitions:

Natural Monopoly

A market situation where a single firm can supply the entire market more efficiently than multiple firms due to high fixed or start-up costs.

Producing Electricity

The process of generating electric power from sources of primary energy such as coal, natural gas, nuclear, solar, or wind energy.

Economic Inefficiency

A situation where resources are not utilized in the most productive way, leading to lost potential output or welfare.

Profit-Maximizing Price

The price at which a company can make the most profit, considering the balance between price and quantity sold.