If government expenditure on goods and services increase by $100 billion, then aggregate demand
A) increases by $100 billion.
B) increases by less than $100 billion.
C) increases by more than $100 billion.
D) remains unchanged.
E) decreases by more than $100 billion.
C
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Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume goods X and Y are normal goods and the price of good X decreases. Then the substitution effect will lead consumers to consume:
A. more of good X and less of good Y. B. more of good X and more of good Y. C. less of good X and less of good Y. D. less of good X and more of good Y.
An inflationary GDP gap is equal to the
A. Difference between equilibrium GDP and full-employment GDP. B. Difference between potential GDP and full-employment GDP. C. Increase in the price level caused by the inflation. D. Recessionary GDP gap.
An increase in inflationary expectations that causes firms to increase their prices shifts the
A. aggregate demand curve to the left. B. aggregate demand curve to the right. C. aggregate supply curve to the right. D. aggregate supply curve to the left.
Explain how the use of leading economic indicators to predict recessions can lead to less accurate policy decisions