If the government increases expenditure by $40 billion and increases tax revenues by $40 billion, what is the impact on aggregate demand? Explain your answer
What will be an ideal response?
Aggregate demand increases. The government expenditure multiplier shows that the increase in government expenditure increases aggregate demand by more than $40 billion. And the government tax multiplier shows that the increase in tax revenue decreases real GDP by more than $40 billion. But, the magnitude of the government expenditure multiplier exceeds the magnitude of the tax multiplier, so the net effect, which is the balanced budget multiplier, is that aggregate demand increases.
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Refer to Figure 17-9. A(n) ________ would be depicted as a movement from A to D to C
A) increase in short-run aggregate supply B) supply shock, such as rising oil prices, C) implementation of contractionary monetary policy D) increase in aggregate demand
If there isn't sufficient information available, then which of the following approaches to reduce conflicts of interest will have the lowest probability of working?
A) leave it to the market B) supervisory oversight C) separation of functions D) socialization of information production