What role can confidence and fear play in the economy?
A. Confidence and fear can shift the AD curve inward but not outward.
B. Confidence and fear can shift the AD curve outward and inward, respectively.
C. The impact of confidence and fear has not been effectively incorporated into macroeconomic models.
D. Confidence and fear can shift the SRAS upward and downward, respectively.
Ans: B. Confidence and fear can shift the AD curve outward and inward, respectively.
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The goal of stabilization policy is to stabilize aggregate _____. As a result, stabilization policy will also stabilize _____ and _____
Fill in the blank(s) with correct word
Automatic stabilizers
a. increase the problems that lags cause in using fiscal policy as a stabilization tool. b. are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. c. are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession. d. All of the above are correct.