The multiplier helps explain
A. why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income.
B. why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes.
C. why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending.
D. why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment.
Answer: C
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A positive cross price elasticity of demand between two goods suggests that the goods are
A) not related. B) complements. C) substitutes. D) both of unitary elasticity.
The classical theory of inflation:
A. describes a long-run equilibrium. B. explains the direct relationship between money supply and the price level. C. shows neutrality of money in the long run. D. All of these statements are true.
When property rights are well defined and markets are competitive, the
a. market equilibrium violates the conditions for economic efficiency. b. market equilibrium is consistent with economic efficiency. c. conditions necessary for economic efficiency no longer apply. d. quantity supplied will rarely equal the quantity demanded.
If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,
a. U.S. net capital outflow is $300 billion; capital is flowing into the U.S. b. U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. c. U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. d. U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S.