When the economy experiences a bust, the government knows exactly which policies will spur an economic recovery.
Answer the following statement true (T) or false (F)
False
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In the aggregate demand-aggregate supply model, economic growth can be illustrated by an
a. outward shift of the aggregate demand curve. b. inward shift of the aggregate demand curve. c. inward shift of the aggregate supply curve. d. All of the above.
Imagine that a country is at point X of this production possibilities frontier and a country is at point Y.
A. The country at point X will probably grow faster than the country at point Y.
B. The country at point Y will probably grow faster than the country at point X.
C. The two countries will probably grow at about the same speed.
D. There is no way of predicting which country will grow faster.
To eliminate an AD shortfall of $120 billion when the economy has an MPC of 0.75, the government should decrease taxes by
A. $400 billion. B. $40 billion. C. $120 billion. D. $30 billion.
Figure 9-1
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In Figure 9-1, at $3,000 billion real GDP,
A. spending exceeds total output and inventories will fall. B. inventories are constant. C. aggregate demand equals aggregate supply. D. spending falls short of output and inventories will rise.