Along the Keynesian range of the aggregate supply curve, an increase in the aggregate demand curve will increase:
A. both the price level and real GDP.
B. only real GDP.
C. only the price level.
D. real GDP and reduce the price level.
Answer: B
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
In behavioral economics, the term salience refers to
A) relevance to the problem being investigated. B) people only consider information when it is conveyed in a subtle manner. C) how an experiment is designed. D) people consider information when it is presented in an "eye grabbing" manner.
When government decides to use fiscal policy:
A. the information for how much to change taxes is readily available. B. the expedited process of approval aids with quick enactment. C. it always keeps the economy closer to potential GDP than it otherwise would be. D. It may take time to implement it.
Legal reserves are
A. vault cash plus Treasury notes. B. funds that banks have on reserve with their district Federal Reserve Bank plus vault cash. C. Treasury notes, vault cash, and demand deposits. D. Treasury notes plus demand deposits.