A cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future income will fall causes aggregate
a. demand to shift outward
b. demand to shift inward
c. supply to shift outward
d. supply to shift inward
e. supply and aggregate demand to shift inward
B
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Provisions in the budget that cause government spending to rise or taxes to fall without legislation when GDP falls are known as
A) primary deficit enhancers. B) expansionary fiscal stimulus. C) non-political fiscal policy. D) automatic stabilizers.
Suppose there are only two goods, apples and oranges. What happens if the price of each good increases by 15 percent?
a. The consumer will substitute apples for oranges. b. The consumer will substitute oranges for apples. c. There is no substitution effect because relative prices have remained constant. d. Demand for both goods increases. e. Demand for both goods decreases.
Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?
a. Both price and quantity should increase. b. Both price and quantity should decrease. c. Price should increase and quantity decrease. d. Price should decrease and quantity increase. e. Nothing.
The quantity theory of money states that if the velocity of money is stable or at least predictable, then: a. the quantity of money in circulation determines real GDP in the short run
b. the quantity of money in circulation determines aggregate spending. c. the quantity of money in circulation determines both real GDP and the price level in the long run. d. the quantity of money in circulation determines only the price level in the long run. e. the quantity of money in circulation determines the potential output in the long run.