Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output
B. D; an expansionary
C. B; recessionary
D. D; a recessionary
Answer: D
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The Discount Rate
Assuming a fixed exchange rate, a decrease in U.S. prices relative to European prices will:
a. decrease European exports to the United States. b. increase U.S. imports from Europe. c. decrease aggregate spending in the U.S. d. not affect U.S. exports or imports. e. raise the purchasing power of U.S. consumers.
Other things equal, which of the following goods would have the most inelastic price elasticity of demand?
A. All red t-shirt sold in the U.S. B. A red t-shirt from Macy's (a large department store). C. A t-shirt from The Gap (a famous American retail store). D. All shirts, of any color, sold in the U.S.
When the prices of a country's imports increase, the prices of domestic goods may increase. This occurs because
A. an increase in the prices of imported inputs will cause aggregate supply to increase. B. an increase in the prices of imported inputs will cause aggregate demand to decrease. C. if import prices rise relative to domestic prices, households will tend to substitute domestically produced goods and services for imports. D. if import prices rise relative to domestic prices, households will tend to substitute imports for domestically produced goods and services.