According to Baumol and Blinder, the real-world multiplier will be smaller than 1/(1 ? MPC) because the 1/(1 ? MPC) measure is based on
a. a model that ignores inflation associated with the expansion of income.
b. a model that ignores taxes that tend to change as income changes.
c. a model that ignores the effects of international trade.
d. all of the above.
d
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Aggregate demand is the:
A. Total quantity of output demanded at alternative price levels. B. Total quantity of output demanded but only at full employment. C. Quantity of goods demanded by the largest corporations in the country. D. Quantity of new goods and services produced.
Refer to the figure above. Which of the following is likely to happen if a price control below the equilibrium price is imposed?
A) Quantity supplied will exceed quantity demanded. B) Quantity demanded will exceed quantity supplied. C) Consumer surplus will decrease. D) Producer surplus will increase.