The above figure gives your budget line between CDs and magazines. Which combination of CDs and magazines are affordable?
A) combination a
B) combinations a, b, c, and d
C) combination c only
D) combinations b, c, and d
D
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Because fiscal policy affects the quantity that the government borrows in financial capital markets, it not only affects aggregate demand, but it can also affect _____________ rates.
a. interest b. employment c. inflation d. wage
Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD1 the result in the long run would be:
A. P4 and Y1. B. P4 and Y2. C. P5 and Y1. D. P5 and Y2.
Which of the following statements draws a false conclusion?
A. Life expectancy in an average African country is lower than in an average European country; therefore Europeans can expect to outlive Africans. B. Nations that currently produce no capital goods, and whose inhabitants are hungry, risk famine with internally funded capital investments. C. Some African nations have substantially more food and capital investment than others; therefore, their standard of living is higher. D. Population reduction policies, if effective, can improve the nation's wealth by increasing real per capita GDP.
Suppose a recession occurs as a result of a negative supply shock, and instead of the economy naturally working its way back to equilibrium, the government uses policy to shift the aggregate demand curve to fight the recession. Using policy this way would
A) bring real GDP back to potential GDP more quickly but would result in a permanently higher price level. B) bring real GDP back to potential GDP more slowly but would bring the price level back to the original price level more quickly. C) quickly result in a new, higher level of real GDP and a permanently lower price level. D) bring the price level back to its original level more quickly but would result in a permanently lower level of potential GDP.