So we can see that an increase in government spending will raise the level of economic equilibrium, while a decrease in government spending will lower it
What will be an ideal response?
The multiplier effect, which is the same size in both directions, gives the policy extra "bang for the buck"—in this case, a change in government spending leads to five times as great a change in national income
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Let's assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual good (S) in a day, while Cal can produce 1 M or 2 Ss in a day. Which statement below is true?
A) Ben can produce spiritual goods more efficiently than Cal. B) Cal can produce material goods more efficiently than Ben. C) Ben can produce material goods more efficiently than Cal. D) Ben can produce both material and spiritual goods more efficiently than Cal.
In the absence of the Ricardo-Barro effect, an increase in the government deficit results in a ________ real interest rate and a ________ equilibrium quantity of investment
A) higher; higher B) higher; lower C) lower; higher D) lower; lower