Refer to the above figure. Suppose the economy is operating at point A. There is a recessionary gap of ________, which can be closed by ________
A) $3 trillion; increasing government spending by $1 trillion
B) $1 trillion; expansionary fiscal policy that shifts the short-run aggregate supply curve through point C
C) $2 trillion; expansionary fiscal policy that generates another $2 trillion in total spending
D) $2 trillion; an increase in government spending of $14 trillion
C
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What would happen in the market for knee replacement surgery if insurance companies started to cover a smaller portion of the cost of the surgery, and fewer doctors decide to enter the field of joint replacement surgery?
A) Supply will decrease, but this will not shift the demand curve. B) Demand will decrease and supply will increase. C) Demand and supply will both decrease. D) Demand will decrease, but this will not shift the supply curve.
Assume an economy with a single bank, no excess reserves, no savings accounts, and no currency held by the public. With a required reserve ratio of .4, the demand deposit expansion multiplier is
A) 20. B) 10. C) 4. D) 2.5.
Topic Market failure, Difficulty M, Type RE, Answer c Which of the following is not an example of market failure?
a. Lack of competition. b. Externalities. c. Equilibrium. d. Extreme income inequality.
A supply curve that illustrates the law of supply ____________.
Fill in the blank(s) with the appropriate word(s).