The spending multiplier tells us the:
A. amount by which GDP increases when spending increases by $1.
B. amount by which GDP decreases when spending on capital goods increases by $1.
C. fraction of each dollar that will decreases GDP of each dollar spent.
D. amount by which spending increases when GDP increases by $1.
A. amount by which GDP increases when spending increases by $1.
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In the income-expenditure model, for each price level there is a different equilibrium output level. These various price level and equilibrium output combinations are used to derive
A) the slope of the planned expenditures line. B) the aggregate supply curve. C) the aggregate demand curve. D) a point on the aggregate demand curve.
Adam Smith was an advocate of:
a. mercantilism. b. a nation maximizing its stock of gold. c. unrestricted or free trade. d. the visible hand of public interest.
What phenomenon does the kinked demand theory attempt to explain? What assumptions does it make? Finally, what criticism has been leveled against the theory?
Trace through the Keynesian cause-and-effect sequence. A decrease in the money supply will cause the interest rate to
a. fall, boosting investment and shifting the AD curve to the right, leading to an increase in real GDP b. fall, boosting investment and shifting the AD curve to the right, leading to a decrease in real GDP c. rise, cutting investment and shifting the AD curve to the right, leading to an increase in real GDP d. rise, boosting investment and shifting the AD curve to the right, leading to an increase in real GDP e. rise, cutting investment and shifting the AD curve to the left, leading to a decrease in real GDP