Suppose the economy is initially in equilibrium where real GDP equals potential GDP and the inflation rate is at the target rate. Other things equal, a housing boom will cause aggregate expenditures to increase, which will result in
A) an increase in aggregate demand and an increase in the inflation rate.
B) an increase in aggregate supply and an increase in the inflation rate.
C) an increase in aggregate demand and a decrease in the inflation rate.
D) an increase in aggregate supply and a decrease in the inflation rate.
A
You might also like to view...
Assume that GDP = $10,000 and the MPC = 0.75. If policy makers want to increase GDP by 30 percent, and they want to change taxes and government spending by equal amounts, how much would government spending and taxes each need to increase?
A) $300 B) $750 C) $1,000 D) $3,000
Refer to Table 4-4. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?
A) W* = $9.00; Q* = 370,000 B) W* = $9.00; Q* = 740,000 C) W* = $8.50; Q* = 380,000 D) W* = $8.50; Q* = 360,000