If the government cuts taxes by $200 million and simultaneously decreases government spending by $200 million, then
A. Aggregate demand will decrease by $200 million.
B. Aggregate demand in the economy will remain unchanged.
C. Aggregate demand will rise because the government decrease in purchases occurs so slowly.
D. People will spend only part of their tax cut, so aggregate demand will eventually rise by $200 million.
Answer: A
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The largest component of the consumer price index is ________.
A. medical care B. transportation C. apparel D. housing
As currently calculated, the CPI tends to overstate the true inflation rate because
A) we cannot know what the true inflation rate is. B) it fails to correctly measure quality changes for some products. C) the market basket selected is inappropriate. D) the market basket fails to weigh housing costs sufficiently.
In general, autonomous spending increases have a lower multiplier effect on real GDP when the economy is open to international trade
a. True b. False Indicate whether the statement is true or false
Despite the monetary expansion of the 1992-2000 period, the inflation rate
a. rose due to adverse supply shocks. b. rose due to large increases in aggregate demand. c. fell despite adverse supply shocks. d. fell due to favorable supply shocks.