How does aggregate demand (AD) curve differ from an individual demand curve (D)?
A. D represents the price-quantity relationship for a single good or service while AD looks at the entire economic system.
B. AD is generally vertical while D is usually downward sloping.
C. AD is generally a downward sloping curve while D usually slopes upward.
D. Look for D in macroeconomic analyses and for AD in microeconomics.
Answer: A
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
What is the difference between market income and money income? Which is more equally distributed?
What will be an ideal response?
"Crowding out" refers to the decrease in ________ that may result from an increase in government spending
A) private investment B) imports C) private saving D) all of the above E) none of the above
According to Friedrich Hayek and his followers, the booms and busts of the business cycle are primarily the result of
a. fluctuations in aggregate demand. b. the "animal spirits" of private investors. c. excessive credit expansion and artificially low interest rates that trigger malinvestment. d. the unwillingness of political decision-makers to follow the advice of macroeconomists who know how to alter fiscal policy in a manner that would virtually eliminate the ups and downs of the business cycle.