Q15. Which one of the following statements is accurate in describing the expenditure multiplier effect?

a. An increase in spending by $1 would cause the macro equilibrium to increase by more than $1.

b. A decrease in spending by $1 would cause the macro equilibrium to decrease by more than $5.

c. A decrease in spending by $1 would cause the macro equilibrium to decrease by less than $1.

Q17. A vertical AS curve means that changes in GDP will be caused by

a. changes in the price level.

b. changes in aggregate demand.

c. changes in productivity.

Q18. Imagine that this year, Mexico's economy experienced a decrease in export sales and an increase demand for imports. Because of the resulting decrease in aggregate demand for Mexican products and services, industries now have a labor glut and wages have begun to drop. As a Neoclassical economist, what would you expect to happen over time in Mexico's macroeconomy?

a. Wages and prices will fall over the long-term, and GDP will remain at potential on the vertical AS curve.

b. Wages will be sticky and fall slowly, prices will fall rapidly and the long term AS curve will shift to the left over the long-term.

c. Wages will fall rapidly and with the decrease in demand for outputs the economy will operate below potential GDP for both the short and long term.