On the graph above, consider a point A on the aggregate demand curve and above the aggregate supply curve. At this point, ________
A) quantity demanded equals output, but the inflation rate will fall, so output will rise
B) quantity demanded is greater than quantity supplied, so the inflation rate will rise
C) output is greater than the quantity demanded, so output will fall
D) the aggregate demand curve will shift to the right until quantity demanded is equal to quantity supplied
E) none of the above
A
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A $50 billion increase in both government spending and taxes will
A) increase GDP by less than $50 billion. B) not change the level of GDP. C) increase GDP by $50 billion. D) increase GDP by more than $50 billion.
Even though Mary's income is very low, she makes sure that she purchases enough milk for her family to drink. As her income rises, she does buy more milk. Which graph in the above figure best represents Mary's Engel curve for milk?
A) Graph A B) Graph B C) Graph C D) Graph D
The international substitution effect exists because a
a. higher price level will reduce interest rates and stimulate foreign investment. b. lower price level will make domestically produced goods less expensive relative to foreign goods. c. higher price level will reduce the purchasing power of money. d. lower price level will encourage Americans to import more foreign goods.
If a $1,000 increase in income leads to an $800 increase in consumption expenditures, then the marginal propensity to consume is
a. 0.2 and the multiplier is 1.25. b. 0.8 and the multiplier is 5. c. 0.2 and the multiplier is 1.25. d. 0.8 and the multiplier is 8.