Which of the following correctly describes the mechanics of the spending multiplier?
a. An initial increase in aggregate expenditures, such as an increase in government spending, shifts the aggregate expenditures curve upward vertically.
b. After the expenditures curve shifts upwards, the economy is not in equilibrium because aggregate expenditures now exceed aggregate output, leading to
inventory depletion.
c. Real GDP increases in response to inventory depletion, eventually leading to a new higher level equilibrium real GDP.
d. All of the above answers are correct.
d
You might also like to view...
If interest rates in Europe fall below interest rates in the United States, then, other things equal, the demand for euros will decrease
a. True b. False Indicate whether the statement is true or false
Fiscal policy is the use of government purchases and taxes to alter RGDP and the price level
a. True b. False Indicate whether the statement is true or false
When uncovered interest parity holds, it means that
A. the exchange rate risk is unusually high. B. a currency is expected to appreciate by as much as its interest rate is higher than the interest rate in the other country. C. a currency is expected to appreciate by as much as its interest rate is lower than the interest rate in the other country. D. the forward premium equals the interest rate differential.
A rent ceiling set above the equilibrium rent has no effect
Indicate whether the statement is true or false