1% 2% 3% 5% Real CDP gowth rate Assume that the of formulates A the economy to m
ID: 1128343 • Letter: 1
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1% 2% 3% 5% Real CDP gowth rate Assume that the of formulates A the economy to move at least to point vernment of a, economy inrecesion at pant Y uwarnof the ependiture mdtipler whent polcy dechions. I t chooses to increase government expendstures by 4%, t should expect C) the economy to move at least to point X Dj the economy to move at least to point W the economy to stay at poire Y 37, 3% growth rale "after a real shock the economy is operating at poen Y·inthe abwce of crowdng ededpoley AD, would move the economy to AJ pont V. B, point· C)pontx. D' pont A 38. A decrease in consumption growth will cause real growth to fall in A) the long run only. a) neither the short run nor the long un C) the short tun only. DI both the shont un and the long fun 39. The primary tools of fiscal pollcy ane: a nmentespenáture-money supply. mney supply and money demand. B) taxation and interest rates. Page 5Explanation / Answer
37. C) point X
Fiscal policy shifts AD curve rightwards and meets the SRAS at X.
38. D) both in short run and long run.
39. A) government expenditure and taxation.
Fiscal policy includes government spending and taxation to influence supply of money in the economy.
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