The multiplier principle indicates that if business decision makers become more optimistic about the future and, as a result, increase their investment expenditures by $82 billion, real GDP
a. will increase by less than $82 billion if the economy was initially operating well below capacity.
b. will increase by more than $82 billion if the economy was initially operating well below capacity.
c. will increase by more than $82 billion if the economy was initially operating at full-employment capacity.
d. will decline if the marginal propensity to consume is less than 1.
B
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In the short run, expansionary fiscal policy usually will
A) decrease the price level and decrease real GDP. B) increase the price level and increase real GDP. C) decrease the price level and increase real GDP. D) increase the price level and decrease real GDP.
The demand for a product produced by a union becomes more elastic. After this change, how does an increase in the wage rate paid its members affect their employment?
A) It does not decrease employment at all. B) It decreases employment by less than it would have before. C) It decreases employment by more than it would have before. D) It increases employment.