What is the effect on aggregate demand and the AD curve from either an increase in government expenditure or a cut in taxes?
What will be an ideal response?
Both an increase in government expenditure and a cut in taxes increase aggregate demand and shift the AD curve rightward.
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In the above figure, equilibrium expenditure is equal to
A) $5 trillion. B) $10 trillion. C) $20 trillion. D) $15 trillion. E) None of the above answers is correct
Consumption functions would shift downward if
A. disposable incomes fall. B. disposable incomes rise. C. price levels fall. D. price levels rise.
Assume the production of a good gives rise to external benefits. The government may increase efficiency by
A) subsidizing consumption of the good. B) requiring all producers of the good to be licensed. C) taxing production of the good. D) imposing taxes on the good.
Suppose a comprehensive plan applies to 2,000 low-risk people and 1,000 high-risk people opting for insurance coverage. If the average claim submitted by low-risk people is $200 while that submitted by high-risk people is $2,000 . what would be the net benefit accrued by a high-risk person paying the break even premium charged by the insurance company?
a. -$300 b. $1,800 c. $1,200 d. -$400