Refer to the above figure. The government has just engaged in expansionary fiscal policy shifting the aggregate demand curve from AD 1 to AD 2 . Interest rates have started to rise. Which of the following statements is true in the short run?
A) Real GDP will be $14 trillion since the effect of government spending is not influenced by interest rates.
B) Real GDP will fall back to $11 trillion since the effect that increased government spending has on real GDP is short lived.
C) Real GDP will go beyond $14 trillion as businesses and consumers react to the increase in interest rates.
D) Real GDP will end up somewhere between $11 and $14 trillion as businesses and consumers reduce their spending in response to the increase in interest rates.
Answer: D) Real GDP will end up somewhere between $11 and $14 trillion as businesses and consumers reduce their spending in response to the increase in interest rates.
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A) increase the current account balance by exactly 10 million colon. B) increase the current account balance by less than 10 million colon. C) reduce the current account balance by exactly 10 million colon. D) reduce the current account balance by more than 10 million colon.
Keynesian economists ________
A) observe that prices are perfectly flexible B) believe that the classical dichotomy never holds C) believe that only the interaction between savings and investment affects the real interest rate D) all of the above E) none of the above
"In 2008, air travel decreased substantially despite significant reductions in ticket prices." If this information is correct, it indicates that the law of demand did not apply to air travel in 2008.
a. true b. false
The demand for insulin is typically_________________ than the demand for a large screen TV.
a. More elastic b. More inelastic c. Less elastic d. Less inelastic