Briefly explain why changes in government spending or taxes do not have independent effects on aggregate demand. What does shift the aggregate demand curve in the classical model?
What will be an ideal response?
Government spending and taxes do not have independent effects on aggregate demand because of the adjustment of the interest rate and resulting crowding-out effects on the components of private sector demand. The only things that shift aggregate demand are changes in the money supply or the velocity of money.
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An example of a negative externality created in the market system would be
A) poverty. B) unemployment. C) an increased number of bird flu patients. D) water pollution.
Increased household spending reduces aggregate expenditures
a. True b. False Indicate whether the statement is true or false
Employment discrimination is a source of
a. economic inefficiency. b. increased economic growth. c. innovation. d. shifting production possibilities. e. All of the above are correct.
Which of the following goods is nondiminishable?
A. City street B. National parks C. The use of a lighthouse D. A free concert