If a shift in SRAS results from gains in productivity growth, which are typically measured in terms of a few percentage points per year, the effect will be:
a. relatively small over a few months or even a couple of years.
b. relatively large over a few months or even a couple of years.
c. relatively small over a few months but larger over a couple of years.
d. relatively large over a few months but smaller over a couple of years.
a. relatively small over a few months or even a couple of years.
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By driving up interest rates, an increase in investment spending causes
a. a voluntary decrease in consumption b. a voluntary increase in consumption c. an involuntary decrease in consumption d. an involuntary increase in consumption e. government spending to be crowded out
Use the following graph to answer the next question.
Suppose an economy is in equilibrium at its full employment output level Q2. Next, suppose the outcome of political events causes pessimism among businesses and consumers and the economy's aggregate demand shifts to AD1 (and the new equilibrium output is Q1). Excluding other events, if the government fails to implement expansionary fiscal policy, in the long run, we would expect Real GDP in the economy to
A. shift toward Q0. B. shift past Q2 toward Q3. C. shift back toward Q2. D. remain at Q1.