If the AS curve is upward-sloping, the government alone should raise its purchases by the amount of the AD shortfall in order to reach full-employment equilibrium.
Answer the following statement true (T) or false (F)
False
As long as the AS curve slopes upward, the aggregate demand must increase by more than the size of the recessionary GDP gap in order to achieve full employment. However, it is not necessary for the government to make up the entire shortfall in aggregate demand. Every dollar of new autonomous government spending has a multiplied impact on induced aggregate demand.
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The global financial crisis that began in 2008 was a great illustration of how interdependent national economies are
Indicate whether the statement is true or false
A production possibilities curve always slopes downward to the right because resources
a. are not scarce. b. have no opportunity cost. c. are freely available. d. are limited. e. are not related to outputs.
Compared to low-income families, upper-income families are likely to
a. be larger in size. b. be headed by an adult of prime working age (between 35 years and 64 years). c. have more than one family member working. d. be all of the above.
If the substitution effect dominates the income effect, an increase in transfer payments will have a positive effect on both consumption and labor supply.
Answer the following statement true (T) or false (F)