When there is excess aggregate demand in the economy,
A. Full-employment output is less than equilibrium output.
B. The GDP gap is positive.
C. Desired fiscal restraint equals the AD excess divided by the multiplier.
D. Full-employment output is higher than equilibrium output.
Answer: A
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Answer the next question on the basis of the following demand schedule.PriceQuantity Demanded$615243342516Which of the following is correct?
A. Although the slope of the demand curve is constant, price elasticity of demand goes from inelastic to elastic as we move from high to low price ranges. B. Although the demand curve is convex to the origin, price elasticity of demand is constant throughout. C. Although the slope of the demand curve is constant, price elasticity of demand goes from elastic to inelastic as we move from high to low price ranges. D. A steep slope means demand is relatively inelastic; a flat slope means demand is relatively elastic.
If market supply increases, equilibrium price will:
A. fall, causing a movement along the demand curve. B. rise and demand will shift to the left. C. rise, causing a movement along the demand curve. D. fall and demand will shift to the right.
Suppose your nominal income this year is 5 percent higher than last year. If the inflation rate for the period was 3 percent, then your real income was:
A. increased by 1.67 percent. B. increased by 2 percent. C. increased by 8 percent. D. decreased by 0.6 percent.
In the circular flow model,
A. households buy goods and services while firms sell goods and services. Firms obtain labor from households, capital from government, and raw materials from firms. B. households buy goods and services and firms supply goods. Resources are supplied by other firms. C. households demand goods and services that are supplied by firms, while supplying resources that are demanded by firms. D. households demand goods and services which are supplied by firms, and the firms demand resources that are supplied by intermediate firms.