An increase in the money supply will lead to an increase in equilibrium real GDP only if:
a. the aggregate demand curve is horizontal.
b. the aggregate supply curve is vertical.
c. the investment function is horizontal.
d. the aggregate supply curve is not vertical.
e. the investment function is upward-sloping.
d
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Assume that a manufacturer of stereo speakers purchases $40 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is:
A. $110. B. $30. C. $40. D. $70.
Answer the following questions true (T) or false (F)
1. An increase in government spending increases the supply of money in our economy. 2. An appropriate fiscal policy response when aggregate demand is growing at a slower rate than aggregate supply is to cut taxes. 3. If real equilibrium GDP is above potential GDP, expansionary fiscal policy should be pursued.