What is the? short-run effect of increased deficit spending on an economy experiencing a recessionary? gap?
a. Aggregate demand will increase, creating an inflationary gap.
b. Aggregate demand decreases, and the gap widens.
c. Aggregate demand increases and the gap closes.
d. None of the above
Answer: C. Aggregate demand increases, and the gap closes.
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If 1 - b = WN/PY where W is the nominal wage rate, N is the quantity of labor input, and PY is total income in nominal terms, then labor's share of national income grows if
A) (w - p) > (y - n). B) (w - p) < (y - n). C) (w - n) > (y - p). D) (w - n) < (y - p).
The market demand for wheat is Q = 100 - 2p + 1pb, where pb is the price of barley. If the price of wheat is $2 and the price of barley is $4, the price elasticity of demand
A) equals (-4/100). B) equals (-25). C) equals (-1). D) cannot be calculated without more information.