A change in government purchases shifts the aggregate demand curve by an amount equal to the
A) change in consumption X marginal propensity to consume.
B) change in government purchases X money multiplier.
C) change in government purchases X spending multiplier.
D) change in the spending multiplier X change in government purchases.
Ans: C) change in government purchases X spending multiplier.
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Suppose that R. J. Reynolds raises the price of cigarettes by 10 percent. Although they have no requirement or agreement to do so, the other cigarette firms decide to raise their prices accordingly. This situation is best described as:
a. price leadership. b. a cartel. c. monopolistic competition. d. a market with kinked demand.
SNAP (food stamps) and Medicaid are examples of:
a. money transfers b. resource earnings c. in-kind transfers d. tax expenditures
Investors considering switching capital assets may also consider the potential tax liability and decide not to switch. This is known as bracket creep.
A. True B. False C. Uncertain
When Iceland can generate a product using fewer labor hours and resources than the United States, an economist would say that Iceland had
a. a comparative advantage in production of the product. b. an absolute advantage in production of the product. c. a higher opportunity cost of producing the product. d. no incentive to import the product, regardless of the cost-price conditions for other products.