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- If the long-run aggregate supply curve is vertical, the a change in net taxes on aggregate output in the long run is zero. Select one: O a. additional tax revenue resulting from O b. multiplier effect of O c absolute value of Od. change in government spending based onWhich one of the following economic policies would not be effective in combating a recession? O a. Increase wages to stimulate aggregate demand and depress the rate of unemployment. O b. Expand the money supply and increase fiscal spending to stimulate aggregate demand. O c. Expand the money supply to stimulate aggregate demand and reduce the rate of unemployment. O d. Decrease wages to increase the quantity of labor demanded and to reduce unemployment.Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?
- If the government does easy fiscal policy by changing taxes and the Fed keeps the real money supply the same, then we would see O C and Y rise aggregate demand fall IS shift left. demand for cash fall and C riseIf people expected that a fiscal policy in the form of a tax cut was temporary, then this policy's effect on the economy will tend to be: Select one: O a. Stronger O b. Weaker O c. The exact opposite of what was intended O d. As the multiplier effect would predict O e. None of the choicesSuppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy’s multiplier is 4. a. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 3 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level?
- An economy has a recessionary gap. With no change in aggregate demand, how does the economy return to full employment? O A. The money wage rate rises, real GDP increases, and the price level falls. O B. The money wage rate falls, real GDP increases, and the price level rises. O C. The money wage rate falls, aggregate supply increases, and the price level falls. O D. The money wage rate rises, real GDP decreases, and the price level rises. -to ooloct vour answer.How do fluctuations in aggregate demand and short-run aggregate supply bring fluctuations in real GDP around potential GDP? Starting from a full-employment equilibrium, a decrease in aggregate demand and creates gap. O A. increases real GDP above potential GDP; an inflationary OB. decreases real GDP below potential GDP; an inflationary OC. increases real GDP above potential; a recessionary O D. decreases real GDP below potential GDP; a recessionary _, short-run aggregate , and the economy returns to a full-employment In the long run, the money wage rate supply equilibrium. O A. rises; increases B. falls; decreases C. rises; decreases D. falls; increasesWhich point/s represent an equilibrium in the goods market? a. A only O b. A and D O c. A and C O d. All of the above Which point/s represent an equilibrium in the money market? O a. A and D O b. All of the above O c. A only O d. A and C A decrease in autonomous spending will decrease the equilibrium interest rate. O a. False; keep O b. False; increase O c. False; not affect because autonomous spending is not related to interest rate O d. True
- What would be the effect of an increase in taxes on a graph showing aggregate demand and short and long-run aggregate supply that is initially in long-run equilibrium? The short-run effect of an increase in taxes will be for the O A. aggregate demand curve to shift up. B. aggregate demand curve to shift down. C. short-run aggregate supply curve to shift left. O D. short-run and long-run aggregate supply curves to shift right. The new short-run equilibrium will be where O A. the new aggregate demand curve intersects the original long-run aggregate supply curve. OB. the original aggregate demand curve intersects the original short-run aggregate supply curve. O C. the new aggregate demand curve intersects the original aggregate demand curve. D. the new aggregate demand curve intersects the original short-run aggregate supply curve.Which of the following both shift aggregate demand right? O A. net exports rise for some reason other than a price change and the money supply rises. O B. net exports rise for some reason other than a price change and the price level rises. O C. net exports fall for some reason other than a price change and the money supply rises. O D. net exports fall for some reason other than a price change and the price level rises.18. The multiplier concept is important in the Keynesian model because Select one: O a. both (b) and (c) of the above. Ob. It explains why a small change in government spending can have a large impact on equilibrium output. O c. It explains why a large change in government spending has such a small impact on equilibrium output. O d. It implies that households can spend more as they are able to earn more income later