QUESTION 48 In the traditional macro model with no govenment and a closed econom

Question

QUESTION 48 In the traditional macro model with no govenment and a closed economy, aggregate demand is equal to. O consumption plus intended investment. O consumption plus actual investment. O income plus intended investment. income plus actual investment. QUESTION 49 If the economy is in a severe recession, which of the following is the fiscal policy most effective in stimulating production? Government spending increases. O Government spending decreases Personal income taxes are increased O The Federal Reserve buys bonds on the open market. QUESTION 50 During the Great Depression, John Maynard Keynes quipped that in the long run, we are all dead" in response to classical economists' assertions that O the economy suffered from insufficient aggregate demand. O inflation would fall in the long run. O the economy would eventually recover without intervention the economy was plagued by structural unemployment

Explanation / Answer

48) Option 1 is correct ( AD = consumption + intended investment)

49) Option 1 is correct (Increase in government spending would be effective in stimulating production)

50) Option 3 is correct

Classical economists believed that the economy would eventually recover without intervention in the long run owing to the free market mechanism.

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