In November, 2012, U.S. lawmakers were faced with a "fiscal cliff:" if they did not agree on how to reduce the federal deficit, automatic tax increases and drastic cuts in government spending would take effect
What would happen if the fiscal cliff occurred? A) The aggregate demand curve shifts leftward, the price level falls and real GDP decreases.
B) The aggregate demand curve shifts rightward, the price level rises and real GDP increases.
C) The short run aggregate supply curve shift leftward, the price level rises and real GDP decreases.
D) The short run aggregate supply curve shifts rightward, the price level falls and real GDP increases.
A
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If the United States is a "net borrower" from abroad
A) net foreign investment must be positive. B) national saving is less than domestic investment. C) the United States must be exporting more than it is importing. D) net capital flows must be negative.
Assume that there is an increase in perceived bankruptcy risk. As a result of this we would expect to see
a. income and interest rates to rise. b. money demand and interest rates to fall. c. money demand and interest rates to rise. d. money supply to rise and interest rates to fall.Figure 7-1