Refer to the above figure. Suppose the economy is at E and the government uses an expansionary fiscal policy to move the aggregate demand curve to AD2. In the end, the aggregate demand curve is still AD1. A possible reason for this is that
A) the economy is already at full employment.
B) the increased borrowing causes higher interest rates, which encourage people to save more and increase investment spending due to the extra saving.
C) people increase saving because they anticipate higher future taxes, resulting in a reduction in current consumption spending that offsets the increased government spending.
D) some of the increased government spending is not counted in GDP.
Answer: C) people increase saving because they anticipate higher future taxes, resulting in a reduction in current consumption spending that offsets the increased government spending.
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In the two-country model of international labor mobility
A) the effect of migration is to cause real wages in the two countries to converge. B) the effect of migration is to cause real wages in the two countries to diverge. C) labor has only limited international mobility. D) the long-run equilibrium global real wage is equal to the lesser of the pre-migration wages in the two countries. E) the long-run equilibrium global real wage is equal to the greater of the pre-migration wages in the two countries.
What institution or initiative has actively marshaled scientific evidence to remove doubts about the seriousness of global warming?
a. NATO b. the Convention on Biological Diversity c. the Intergovernmental Panel on Climate Change d. the United Nations Economic Program
A feature of monopolistic competition is:
A. considerable control over price. B. homogeneous or standardized products. C. a patent-protected product. D. nonprice competition.
Since 1929, the distribution of money income in the United States has
A) become slightly more unequal. B) not dramatically changed. C) become more equal. D) shifted toward the poorer 20 percent away from the richer 20 percent.