For each of the following events,explain the short-run and long-run effects on output and price level,assuming policymakers take no action. a) The stock market declines sharply,reducing consumers' wealth. b) The federal government increases spending on national defence.
For each of the following events,explain the short-run and long-run effects on output and price level,assuming policymakers take no action. a) The stock market declines sharply,reducing consumers' wealth. b) The federal government increases spending on national defence.
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 5.11P
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10.1For each of the following events,explain the short-run and long-run effects on output and price level,assuming policymakers take no action.
a) The stock market declines sharply,reducing consumers' wealth.
b) The federal government increases spending on national defence.
10.2 In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment?Explain.
a)When the investment accelarator is large or when it is small?
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