Answer the following statements true (T) or false (F)
1. As the economy expands, it requires less and less investment.
2. Keynes described a horizontal short-run aggregate supply curve when output can be increased by using unemployed resources.
3. As income increases, the absolute level of planned consumption will increase.
4. Keynes recommended the use of government deficit spending to overcome widespread unemployment.
5. A composite aggregate supply curve is horizontal at low levels of output, then upward sloping for higher levels of output until output reaches capacity and the AS curve becomes vertical.
1. FALSE
2. TRUE
3. TRUE
4. TRUE
5. TRUE
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Refer to Figure 13-7. Which of the following statements describes the best course of action for the firm depicted in the diagram?
A) The firm should exit the industry because its price is less than its average total cost. B) The firm should minimize its losses by producing Qy units and charging a price of P0. C) The firm should minimize its losses by producing Qy units and charging a price of P1. D) The firm should minimize its losses by producing Qy units and charging a price of P2.
An unexpected increase in the money supply will tend to cause
A) an increase in stock prices. B) a reduction in stock prices. C) no change in stock prices. D) an ambiguous effect on stock prices.