Refer to Figure 10.3. If autonomous investment spending drops by enough to shift the aggregate demand curve from AD1 to AD2, the multiplier effect is likely to
A. Create a second induced shift from AD2 to AD3.
B. Create a second induced shift from AD2 back to AD1.
C. Have no effect on the AD curve.
D. Create a second induced shift from AD2 to AD0.
Answer: A
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An increase in total factor productivity shifts the PPF
A) upward, but does not change its slope. B) upward, and also changes its slope. C) downward, but does not change its slope. D) downward, and also changes its slope.
Ahmed is working and is spending more than he is earning by using his savings to make up the difference. Which of the following statements is TRUE?
A) Ahmed is in equilibrium since he pays all of his bills. B) Ahmed is in disequilibrium. C) By using savings Ahmed is using special drawing rights. D) By using savings Ahmed has caused the balance of payments to go into a deficit situation.