Question
Belize's exchange rate is fixed at $2BZ = $1US. What will be the impact of expansionary fiscal policy on the Aggregate Demand (AD) curve in
Belize's exchange rate is fixed at $2BZ = $1US. What will be the impact of expansionary fiscal policy on the Aggregate Demand (AD) curve in Belize?
a.a large outward shift in the AD curve
b.a large inward shift in the AD curve
c.no effect on either the position of the AD curve or the interest rate
d.no effect on the position of the AD curve, but interest rates will rise
Assume that a closed economy begins in long-run equilibrium. Pessimism due to the Covid-19 pandemic shifts the Aggregate Demand curve $100 billion to the left. The government wants to increase spending in order to avoid a recession. If the Crowding Out Effect is always half as strong as the Multiplier Effect, and if the MPC equals 0.75, by how much do government purchases have to rise?
a.$200 billion
b.$100 billion
c.$50 billion
d.$25 billion
Assume that the economy begins in long-run equilibrium. If the minimum wage is increased and there is increased pessimism about future business conditions, what would we expect to happen in the long-run?
a.the effect on the price level is uncertain, but real GDP will be lower
b.the effect on the price level is uncertain, but real GDP will be higher
c.the effect on the price level is uncertain, but real GDP will be unaffected
d.the price level will rise, but real GDP will be unaffected
It has been argued that at the end of the U.S. Great Depression people's expectations of the rate of inflation increased. What would be the long-run effect of this as predicted by the Phillips Curve?
a.higher inflation and higher unemployment
b.no change in inflation, but lower unemployment
c.higher inflation and lower unemployment
d.higher inflation, but no change in unemployment
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