Which of the following statements is correct about measuring collective demand for public and private goods?
A. Both public and private good demand are found by horizontally adding individual demand curves.
B. Private good demand is found by horizontally adding individual demand curves; public good demand is found by vertically adding individual demand curves.
C. Both public and private good demand are found by vertically adding individual demand curves.
D. Public good demand is found by horizontally adding individual demand curves; private good demand is found by vertically adding individual demand curves.
Answer: B
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What is measured on the vertical axis when we draw a graph of long-run aggregate supply?
A) output of consumer goods B) real GDP C) production of capital goods D) the price level
Contractionary fiscal policy involves decreasing government purchases or increasing taxes
Indicate whether the statement is true or false
Refer to Figure 24-4. Given the economy is at point A in year 1, what will happen to the price level in year 2?
A) It will remain constant. B) It will fall. C) It will rise. D) not enough information to answer the question
If an increase in investment of $50 causes an increase in real GDP of $250, the value of the spending multiplier is:
A. 5. B. 0.20. C. 0.80. D. 10.