Suppose that consumers become pessimistic about the future health of the economy. What will happen to aggregate demand and to output? What might the president and Congress have to do to keep output stable?
As consumers become pessimistic about the future of the economy, they cut their expenditures so that aggregate demand shifts left and output falls. The president and Congress could adjust fiscal policy to increase aggregate demand. They could either increase government spending, or cut taxes, or both.
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Causation occurs when:
A) two variables tend to move in opposite directions. B) change in one variable is the reason for the change in another variable. C) two variables tend to move in the same direction. D) change in one variable does not cause any change in another variable.
As the number of substitutes for a good increases, its own-price elasticity becomes more
a. Unitary b. Relatively elastic c. relatively inelastic. d. perfectly inelastic.
The assumption that individuals act rationally implies that
a. people think only of themselves and disregard the well-being of others b. people undertake all those activities that yield benefits to themselves c. people only consider the costs of an activity to decide whether it is worthwhile d. the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed e. people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile
In a market characterized by many sellers, if an outsider devises a way to reduce transaction costs it will:
a. benefit both buyers and sellers. b. cause both buyers and sellers to lose. c. benefit the buyers but cause the sellers to lose. d. benefit the sellers but cause the buyers to lose.