The theory of new Keynesian inflation dynamics suggests that a fall in aggregate demand would
A) immediately raise real GDP, followed by a more sluggish increase in the price level.
B) immediately raise the price level, followed by a more sluggish decline in real GDP.
C) immediately reduce real GDP, followed by a more sluggish decline in the price level.
D) immediately reduce the price level, followed by a more sluggish decline in real GDP.
C
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Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
One implication of the policy ineffectiveness proposition (PIP) is that expansionary __________ policy is not effective at raising __________
A) monetary; Real GDP B) monetary; the price level C) fiscal; the price level D) a and b E) a and c
A physician whose job is to determine if a patient needs to be referred to a specialist is called
A. an HMO doctor. B. a primatologist. C. a primary care physician. D. an intern.
If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by:
A. increasing government spending by $25 billion. B. increasing government spending by $80 billion. C. decreasing taxes by $25 billion. D. decreasing taxes by $100 billion.