What is the aggregate demand multiplier and why does it occur?
What will be an ideal response?
The aggregate demand multiplier is an effect that magnifies changes in expenditure plans. So, for example, if some component of expenditure such as investment increases, aggregate demand increases by more than the increase in investment. The aggregate demand multiplier exists because when aggregate demand increases, households' incomes increase. Then the increase in income results in an increase in consumption expenditure, which adds to the initial increase in aggregate demand.
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A perfectly competitive firm should shut down in the short-run if price falls below the minimum of
A) marginal cost. B) marginal revenue. C) average total cost. D) fixed costs. E) average variable costs.
Which of the following is an entitlement program?
A) Social Security B) Medicare C) Medicaid D) all of the above E) none of the above