An increase in government purchases of $200 billion will shift the aggregate demand curve to the right by
A) less than $200 billion.
B) more than $200 billion.
C) $200 billion.
D) None of the above are correct. This policy shifts the long-run aggregate supply curve.
B
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Answer the following statement true (T) or false (F)
1) The efficiency loss of a tax is the tax revenue collected by government minus the value of the public goods financed through the tax. 2) The greater the elasticity of demand and supply, the greater is the efficiency loss of a tax. 3) Economists agree that corporations always shift the corporate income tax to consumers by raising product prices. 4) Although state and local taxes are highly progressive, federal taxation is predominantly
If the absolute price elasticity of demand is 2.5, a 10 percent increase in the price will cause
A) the quantity demanded to decrease by 2.5 percent. B) the quantity demanded to decrease by 25 percent. C) the quantity demanded to decrease by 4 percent. D) the quantity demanded to decrease by 40 percent.