In 2009 President Obama and Congress increased government spending. Some economists thought this increase would have little effect on output. Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?
a. the MPC is small and changes in the interest rate have a small effect on investment
b. the MPC is small and changes in the interest rate have a large effect on investment
c. the MPC is large and changes in the interest rate have a small effect on investment
d. the MPC is large and changes in the interest rate have a large effect on investment
b
You might also like to view...
Refer to Figure 12-5. The firm's manager suggests that the firm's goal should be to maximize average profit. In that case, what is the output level and what is the average profit that will achieve the manager's goal?
A) Q = 1,800 units, average profit = $20 B) Q = 1,350 units, average profit = $5 C) Q = 1,100 units, average profit = $6 D) Q = 1,350 units, average profit = $9
The price of a new textbook increased by 25 percent and the price of a used textbook increased by 30 percent. What happened to the relative price of the new textbook?
A) It increased by 5 percent. B) It increased, but we can't tell by how much without more information. C) It decreased by 5 percent. D) It decreased, but we can't tell by how much without more information.
How do targeted asset purchases alter the outlook for the economy and inflation?
What will be an ideal response?
The length of the short run is the same for all firms
Indicate whether the statement is true or false