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

Economics

You might also like to view...

Draw a graph to illustrate the effect of higher gasoline prices on the demand for large SUVs. What is the relationship between gasoline and SUVs?

What will be an ideal response?

Economics

The total revenue test says that if a price decrease leads to

A) an increase in total revenue, demand is income elastic. B) a decrease in total revenue, demand is income inelastic. C) a decrease in total revenue, demand is price inelastic. D) a decrease in total revenue, supply is price inelastic. E) a decrease in total revenue, supply is price elastic.

Economics

Refer to Table 2-31. This table shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland

a. Which country has an absolute advantage in the production of cell phones? b. Which country has an absolute advantage in the production of lumber? c. What is Estonia's opportunity cost of producing one cell phone? d. What is Finland's opportunity cost of producing one cell phone? e. What is Estonia's opportunity cost of producing one board foot of lumber? f. What is Finland's opportunity cost of producing one board foot of lumber? g. If each country specializes in the production of the product in which it has a comparative advantage, who should produce cell phones? h. If each country specializes in the production of the product in which it has a comparative advantage, who should produce lumber?

Economics

A statement of the stocks of a country's foreign assets and foreign liabilities at a point in time represents the country's

A. balance of payments. B. financial account balance. C. government budget surplus or deficit. D. international investment position.

Economics