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
Answer: D
You might also like to view...
In economics, the factor of production "land" includes all of the following EXCEPT
A) animals, birds, and fish. B) energy. C) wild plants. D) oil. E) plastics.
If a nation has an absolute advantage in the production of some commodity, it
a. can gain only if it has a comparative advantage in the commodity. b. may still gain from trade in the commodity. c. cannot gain from trade in the commodity. d. cannot gain unless it has an absolute advantage in every other commodity.
Which statement is FALSE?
A. Technological change is the key to productivity growth. B. Productivity is output per unit of input. C. The only way to build up capital is to consume more and save more. D. In the 1950s, 1960s, and 1970s, Americans managed to save about 7-8% of disposable income.
A firm is deciding whether or not to close down its plant and modernize by installing new technology. Which of the following should management ignore when making the decision?
A. Cost of lost sales while the plant is closed B. How much the present plant cost C. Added cost of the labor needed for the new plant D. All of the above