Explain how an increase in government expenditure designed to increase aggregate demand can increase potential GDP and aggregate supply
What will be an ideal response?
Some types of government expenditure provide goods and services that increase the nation's production possibilities. For instance, additional government spending on law and order, public education, public health, social infrastructure such as roads and bridges, and productive capital all increase the economy's production possibilities. So an increase in government expenditure that provides these goods and services all increase potential GDP and increase aggregate supply.
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This graph demonstrates the domestic demand and supply for a good, as well as the world price for that good.
According the graph shown, if this economy were open to free trade, it would:
A. export this good, because the world price is greater than the domestic price. B. import this good, because the world price is greater than the domestic price. C. import this good, because the domestic price is greater than the world price. D. export this good, because the domestic price is greater than the world price.
If the cost of the Department of Agriculture's minimum food budget for two people is $2,000 per year, the official poverty line for a family of two would be
A. $667. B. $2,000. C. $6,000. D. $12,000.
Import quotas on steel tend to result in higher quantities of steel being sold at lower prices than would be observed in the absence of a quota
Indicate whether the statement is true or false
If you divide nominal debt by nominal GDP and real debt by real GDP, you will get two different answers
a. True b. False