If an economy is above potential output and the government opts for a contractionary fiscal policy (running surpluses) to shift the AD curve, an economist with a Classical view, who holds the Ricardian equivalence theorem to be practically true, would conclude that the AD curve:
A. does not shift since the lower government spending is offset by higher private consumption.
B. shifts to the left due to lower government spending.
C. does not shift since the lower government spending is offset by lower private consumption.
D. shifts to the right due to lower government spending.
Answer: A
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What happens to wage and rental rate according to the Heckscher-Ohlin model if the price of a good that uses capital extensively increases by 6%?
a. Both wage and rental rate decrease by 6%. b. Both wage and rental rate increase by less than 6%. c. Both wage and rental rate increase by more than 6%. d. Wage rate increases by more than 6% but rental rate decreases. e. Wage rate decreases but rental rate increases more than 6%.
Using the data in the above table, which worker hired at Jefferson's Cleaners is the first to show diminishing marginal returns?
A) the second B) the third C) the fourth D) the fifth
The problems of raising the level of the inflation target include
A) if the zero-lower-bound problem is rare, then the benefits of a higher inflation target are not very large. B) the costs of higher inflation in terms of the distortions it produces in the economy are high. C) it is more difficult to stabilize the inflation rate at a higher targeting level. D) all of the above.
With consumption on the vertical axis and leisure on the horizontal axis, the slope of the budget line is equal to
A) w. B) -w. C) ?. D) -?.