If the economy is experiencing excess demand that is causing inflation, the inflationary pressures can be eliminated by reducing government spending by less than the amount of excess demand.
Answer the following statement true (T) or false (F)
True
A government spending reduction will ultimately reduce aggregate demand by more than the reduction itself through the multiplier. Therefore, if the goal is to eliminate an inflationary gap, the government should cut spending by less than excess demand.
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When considering the aggregate demand curve, the wealth effect, interest rate effect and effects from international trade reinforce each other
Indicate whether the statement is true or false
The growth rate of real GDP is best represented as
A) (Contribution from capital) + (Contribution from labor) + (Contribution from total factor productivity) B) (Contribution from capital + Contribution from labor) / (Contribution from total factor productivity) C) (Contribution from total factor productivity) / (Contribution from capital + Contribution from labor) D) (Contribution from capital) × (Contribution from labor) × (Contribution from total factor productivity)
The above figure illustrates the demand curve for a good. The good has
A) no substitutes. B) only one substitute. C) only a few substitutes. D) many substitutes.
An option allowing the holder to buy an asset in the future is a
A) put option. B) call option. C) swap. D) forward contract.