If no fiscal policy changes are implemented to fight inflation, suppose the aggregate demand curve will exceed the current aggregate demand curve by $900 billion at any level of prices. Assuming the marginal propensity to consume is 0.90, this increase in aggregate demand could be prevented by:
a. increasing government spending by $500 billion.
b. increasing government spending by $140 billion.
c. decreasing taxes by $40 billion.
d. increasing taxes by $100 billion.
d
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A. Individuals B. Companies C. Governments D. Families E. All of the responses are correct.
A firm is generally more interested in marginal profits than in total profits.
Answer the following statement true (T) or false (F)
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a. A government subsidy was removed. b. Extraction costs increased. c. Price controls were suspended. d. An unexpected discovery of reserves was made.
In the dynamic aggregate demand and aggregate supply model, what is the result of aggregate demand increasing faster than potential real GDP?
What will be an ideal response?