If government spending increases, which of the following would be most likely in the short and in the long run? (Both comparisons are with regard to the original price level/output combination.)
a. Short-run increases in the price level, no change in output; long-run increases in output and in the price level
b. Short-run increases in output and in the price level; long-run increase in output, decrease in the price level
c. Short-run decreases in output and in the price level; long-run increase in the price level, no change in output
d. Short-run increases in output and in the price level; long-run increase in the price level, no change in output
e. Short-run decreases in output and in the price level; long-run decreases in output and in the price level
D
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According to some New Keynesian theories, one possible rationale for active policy making is
A) growing competition in U.S. product markets. B) flexible prices. C) sluggish adjustment of the price level in response to changes in aggregate demand D) people are not rational and so do not react to incentives.
________ in the expected future domestic exchange rate causes the demand for domestic assets to shift to the right and the domestic currency to ________, everything else held constant
A) An increase; appreciate B) An increase; depreciate C) A decrease; appreciate D) A decrease; depreciate
Full employment is the situation in which the economy operates at an unemployment rate equal to the sum of:
A. structural and frictional unemployment. B. cyclical and frictional unemployment. C. structural and cyclical unemployment. D. structural, frictional, and cyclical unemployment.
The objective of the Fed and the government is to
A. prevent asset bubbles by recognizing them in real time. B. mitigate the consequences of asset bubbles by recognizing them in real time. C. prevent asset bubbles by recognizing bad lending practices. D. mitigate the consequences of asset bubbles by recognizing bad lending practices.