Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary
B. B; no output
C. B; expansionary
D. A; a recessionary
Answer: A
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Which of the following sequences best represents the crowding-out effect?
a. government purchases ? ? GDP ? ? supply of money ?? equilibrium interest rate ? ? quantity of goods and services demanded ? b. government purchases ? ? GDP ? ? demand for money ?? equilibrium interest rate ? ? quantity of goods and services demanded ? c. government purchases ? ? GDP ? ? demand for money ?? equilibrium interest rate ? ? quantity of goods and services demanded ? d. taxes ? ? GDP ? ? demand for money ? ? equilibrium interest rate ?? quantity of goods and services demanded ?
Portfolio investment means buying
A. less than 10 percent of stock shares of of a foreign company. B. bonds through a financial company. C. more than 50 percent of stock shares of a foreign company. D. a combination of different companies' stock shares.
The Taylor rule implies that the Fed should set the federal funds target based on which of the following?
A) the proportionate gap between actual real GDP and a measure of potential real GDP B) the current deviation of the actual inflation rate from the Fed's inflation objective C) an estimated long-run real interest rate D) all of the above
Assume that people experience a one-time 50 unit increase in their consumption (i.e. the intercept of the consumption function increases by 50). In this case
a. equilibrium income will rise by 50 units times the investment multiplier. b. equilibrium income will rise by 50 units. c. equilibrium income will rise by 50 units times the tax multiplier. d. equilibrium income will not change because this increase is temporary.