In the aggregate expenditures model, we note that an increase in government purchases G and an increase in lump-sum taxes T of the same amount will have
A. essentially the same effect on equilibrium real GDP, both in magnitude and in direction.
B. different effects on real GDP, with the change in G having a larger impact than the change in T.
C. the same magnitudes of impact on equilibrium real GDP, though in opposite directions.
D. different effects on real GDP, with the change in T having a larger impact than the change in G.
Answer: B
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Exhibit 4-10 Supply and demand data for apricots Bushels demandedper month Price perbushel Bushels suppliedper month 50 $5 80 55 4 75 60 3 70 65 2 65 70 1 55 In Exhibit 4-10, assume that the government initially sets a price floor of $4 for apricots, and then removes the $4 price floor. What effect will this price change have?
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