With greater deficit spending, ceteris paribus,
A. There are greater leakages.
B. Aggregate spending should fall.
C. Any inflationary gap will become larger.
D. There is inadequate information to tell what happens to aggregate spending.
Answer: C
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Fiscal expansion
A) stimulates aggregate demand and causes output to decline. B) decreases aggregate demand and causes output to decline. C) stimulates aggregate demand and causes output to rise. D) decreases aggregate demand and causes output to rise. E) decreases government expenditures.
For each of the following changes, what happens to the real interest rate and output in the long run, after the price level has adjusted to restore general equilibrium? How would the results differ, if at all, between the classical and Keynesian
model? Draw a diagram for each part to illustrate your result. (a) Wealth rises. (b) Money supply rises. (c) The future marginal productivity of capital increases. (d) Expected inflation declines. (e) Future income declines.
Monopolistically competitive firms could reduce the average total cost of producing by increasing output; therefore, these firms have
All of the following would affect the position of a country's production possibilities curve, except:
A. technological progress. B. the amount of the capital stock. C. the quantity of labor. D. the level of unemployment.