Following Keynesian economics, and assuming a marginal propensity to consume (MPC) of 0.80, an increase in federal government spending of $100 billion at below full employment would be expected to shift the aggregate demand curve by $500 billion to the right
a. True
b. False
Indicate whether the statement is true or false
True
You might also like to view...
A decrease in the foreign interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to ________, everything else held constant
A) right; appreciate B) right; depreciate C) left; appreciate D) left; depreciate
An investment tax credit ________
A) is designed to incentivize higher capital stock expenditures at any given interest rate B) may lead to increases in autonomous investment C) may put upward pressure on the interest rate D) all of the above E) none of the above
The steeper an isoquant is
A) the greater is the marginal product of labor relative to that of the marginal product of capital. B) the greater is the substitutability between capital and labor. C) the greater is the need to keep capital and labor in fixed proportions. D) the greater is the level of output.
Compared to an economy's self-correcting mechanism, active contractionary fiscal policy will
a. work more slowly and calmly. b. work more quickly. c. have less deflationary effects. d. have a smaller effect on real GDP.