Which of the following best explains the multiplier effect as a result of a $100 million increase in govt spending on highways?
A. More money must be printed to fund govt spending. Money supply increases, interest rates decrease, consumption increases, investment spending increases.
B. Change in spending will cause an increase in real GDP. Govt tax revenue increases so govt spending increases.
C. Govt spending creates a demand for domestically produced goods. Income increases, consumption increases, demand increases
D. Change in govt spending causes an increase in supply of jobs and stimulates production of domestically produced goods/services.
Ans: C. Govt spending creates a demand for domestically produced goods. Income increases, consumption increases, demand increases
You might also like to view...
Refer to Figure 15-7. Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising
Using the static AD-AS model in the figure above, the correct Fed policy for this situation would be depicted as a movement from A) A to E. B) B to C. C) C to D. D) C to B. E) A to B.
Time series variables fail to be stationary when
A) the economy experiences severe fluctuations. B) the population regression has breaks. C) there is strong seasonal variation in the data. D) there are no trends.
Given the same unit costs, a monopolist will produce less output than a perfectly competitive firm
a. True b. False Indicate whether the statement is true or false
If Armenia can produce rugs more efficiently than any other country, it does not necessarily benefit from producing rugs for international trade
a. True b. False