Graphically illustrate the effects of an increase in autonomous consumption on the demand line (ZZ) and Y. Clearly indicate in your graph the initial and final equilibrium levels of output. Briefly explain why this increase in output is greater than (in absolute terms) the initial change in autonomous consumption
What will be an ideal response?
ZZ line will shift upward and Y will increase. The increase in output is greater than the initial change in autonomous consumption is due to the multiplier effect.
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Open market sales of bonds by the Federal Reserve do not have a direct effect on the government budget
a. True b. False
Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?
a. The demand for illegal drugs is inelastic. b. Interdiction results in drug addicts having a greater need for quick cash. c. Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. d. Government drug programs are more lenient now with drug offenders than they were in the 1980s.