Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output
B. D; an expansionary
C. B; recessionary
D. D; a recessionary
Answer: D
You might also like to view...
When a domestic currency is completely backed by a foreign currency and the note-issuing authority establishes a fixed exchange rate to this foreign currency, then the country is said to have
A) created a currency board. B) undergone dollarization. C) adopted a managed exchange system. D) adopted an exchange rate monetary system.
The marginal social cost and private cost curves for a particular common property resource are upward sloping
What happens to the gap between teh actual quantity and the socially optimal quantity as the demand for the resource becomes more inelastic? A) Gap widens B) Gap declines C) Gap does not change D) We do not have enough information to answer this question
Transfer payments, such as unemployment insurance and welfare, are included in the circular flow as part of
a. government purchases b. household saving c. net taxes d. planned investment spending e. household consumption
If real GDP is $21 trillion, consumption is $14 trillion, planned investment is $4 trillion, government purchases are $4 trillion, net exports are -$1 trillion, then the unintended inventory adjustment is:
a. -$2 trillion. b. -$1 trillion. c. $0. d. $1 trillion.