According to the market clearing model a permanent increase in government purchases causes:
a. a decrease in consumption.
b. an increases in real GDP.
c. an increases in the real interest rate.
d. all of the above.
Answer: a. a decrease in consumption.
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
Why does the production possibility frontier have a negative slope?
What will be an ideal response?
Figure 4.5 illustrates a set of supply and demand curves for hamburgers. A decrease in supply and a decrease in quantity demanded are represented by a movement from
A) point c to point a. B) point c to point d. C) point b to point c. D) point a to point d.
Which of the following is not a type of trade restriction?
a. low-interest loans to foreign buyers b. export subsidies for domestic firms c. domestic content requirements d. restrictive health and safety standards e. economies of scale