Question 34(1 point)

Which of the following statements is true?

a

Trade barriers in the 1930s contributed to the Great Depression.

b

With the addition of government and net exports to aggregate expenditure (AE), the economy becomes amixed, closed economy.

c

An increase in Net Taxes (T) has an indirect negative effect on aggregate expenditure (AE) because the increase in T reduces disposable income first, and then consumption falls by an amount equal to the increase inT times the MPC, that is,C = -b x T.

d

All of the above.

e

Only a) and c)

Question 35(1 point)

Which of the following statements is true?

a

When we have a government, changes in either G or T will have amultiplying effecton the economy.

b

Expenditure gapsarise because equilibrium GDP and real GDP do not always match.

c

Arecessionary expenditure gap

("insufficient total spending") exists when aggregate expenditure falls short of full-employment GDP. In this situation output is "low" and unemployment is "high".

d

All of the above.

e

Only a) and b)

Question 36(1 point)

Which of the following statements is true?

a

Aninflationary expenditure gap

("excessive total spending") exists when aggregate expenditure exceeds full-employment GDP.

b

Possible solutions to an inflationary expenditure gap include increasing G, reducing T, or a combination of both.

c

In the expenditure model we are studying, if GDP cannot expand,pure demand-pull inflationwill occur.

d

All of the above.

e

Only a) and c)