Which of the following will most likely occur in the short run when the long-run equilibrium of an economy is disturbed by an unanticipated decrease in aggregate demand?
a. a decrease in output and a higher price level
b. an increase in output and a higher price level
c. a decrease in output and a lower price level
d. an increase in output while prices remain unchanged
C
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What characteristic defines something as money?
A) assets declared by the government to be of value B) a medium of exchange widely accepted in an economy C) notes you can deposit in a savings account D) an asset that earns interest
In the late 1990s, debt-financed government spending decreased in Mexico. Following this decrease, consumption spending increased. Ricardian equivalence would explain this increase in consumption as the result of:
a. people's expectation of higher future taxes required to pay off government debt. b. people's expectation of lower future taxes that induce them to save less. c. automatic stabilization of the economy. d. the crowding out effect. e. an increase in current household disposable income.