Refer to the information provided in Figure 32.2 below to answer the question(s) that follow.
Figure 32.2Refer to Figure 32.2. According to the new classical economists, under rational expectations an expected increase in government spending would
A. shift AD1 to the left.
B. shift AD1 to the right.
C. shift AS1 to the right.
D. none of the above.
Answer: D
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Assume the economy is in a recession and the Federal government decides to cut personal income tax rates. All else equal, the cut in tax rates should
A) increase consumption expenditures and cause real GDP to increase relative to potential GDP. B) increase the nominal interest rate and cause potential GDP to increase relative to real GDP. C) decrease the real interest rate and decrease expectations of inflation. D) increase the target interest rate and cause real GDP to fall relative to potential GDP.
Monetary policy includes changing the level of household taxes.
Answer the following statement true (T) or false (F)
Money fails to act as a store of value when:
a. it is no longer backed by gold. b. the inflation rate is very high. c. the goods produced in an economy are indivisible. d. the economy goes into a recession. e. coins are replaced by paper money.
The wage-schooling locus is
A. downward sloping because education is generally productive. B. upward sloping because education is generally productive. C. horizontal because wages are unrelated to schooling. D. backward bending. E. vertical because education is a public good.