How do fears of future economic problems affect GDP?
(A) Government will spend less and save money for a future economic contraction; GDP will be reduced.
(B) Consumers will spend more money in the short term to prevent future economic problems; GDP will be pushed up.
(C) Businesses will invest more money in the short term to ensure higher profits in the future; GDP will be pushed up.
(D) Consumers will spend less and save money in case future economic problems affect them; GDP will be reduced.
Ans: (D) Consumers will spend less and save money in case future economic problems affect them; GDP will be reduced.
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As the supply curve shifts to the right, the increase in quantity demanded will not depend on the shape of the demand curve
Indicate whether the statement is true or false
The Lucas supply function, in combination with the assumption that expectations are rational, implies that announced policy changes
A. will have no effect on real output. B. will have no effect on nominal output. C. will have no effect on the actual price level. D. will have no effect on the expected price level.