Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary
B. B; no output
C. B; expansionary
D. A; a recessionary
Answer: A
You might also like to view...
For a person to keep his real income steady at a certain level from one year to the next, his nominal income must
A. stay the same as the price index rises. B. rise as fast as the price index. C. rise if the price index falls. D. fall if the price index rises.
If a firm anticipates that it is at a risk of being held up, it is more likely to
a. forgo the transaction completely b. merge with its trading partner c. exchange "hostages" d. All the above
Suppose Russia can produce either 600 pianos or 400 HDTVs, and Italy can produce either 300 pianos or 150 HDTVs. Implicitly, Russia has
A. Both an absolute and a comparative advantage in HDTVs. B. Neither a comparative nor an absolute advantage in HDTVs. C. An absolute but not necessarily a comparative advantage in HDTVs. D. A comparative but not necessarily an absolute advantage in HDTVs.
In considering "returns to scale" we assume that production processes are homothetic.
Answer the following statement true (T) or false (F)