PRICE LEVEL (CPI) 105 104 4 103 102 + 101 100 99 98 97 95 + 8 7 O AD₁ 8 O AD2 O AD3 AD₁ Full Employment The initial short-run equilibrium level of real GDP is $ 8 10 11 12 13 14 REAL GDP (Billions of dollars) 15 As a result, the equilibrium level of real GDP will be $ AD 3 16 AD₂ Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the output gap. According to Keynesian economists, the government policy may result in zero crowding out. Which of the following aggregate demand curves shown in the previous graph would be consistent with zero crowding out? Equilibrium billion, and the initial short-run equilibrium price level is billion, and the equilibrium price level will be According to Keynesian economists, which of the following is true in this case? O The increase in deficit-financed government spending causes real GDP to increase to full-employment output. O Real GDP does not increase; only the price level increases. O The increase in deficit-financed government spending has no impact on real GDP or the price level. O The increase in deficit-financed government spending causes real GDP to increase, but not to full-employment output.
PRICE LEVEL (CPI) 105 104 4 103 102 + 101 100 99 98 97 95 + 8 7 O AD₁ 8 O AD2 O AD3 AD₁ Full Employment The initial short-run equilibrium level of real GDP is $ 8 10 11 12 13 14 REAL GDP (Billions of dollars) 15 As a result, the equilibrium level of real GDP will be $ AD 3 16 AD₂ Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the output gap. According to Keynesian economists, the government policy may result in zero crowding out. Which of the following aggregate demand curves shown in the previous graph would be consistent with zero crowding out? Equilibrium billion, and the initial short-run equilibrium price level is billion, and the equilibrium price level will be According to Keynesian economists, which of the following is true in this case? O The increase in deficit-financed government spending causes real GDP to increase to full-employment output. O Real GDP does not increase; only the price level increases. O The increase in deficit-financed government spending has no impact on real GDP or the price level. O The increase in deficit-financed government spending causes real GDP to increase, but not to full-employment output.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter26: The Neoclassical Perspective
Section: Chapter Questions
Problem 21P: Use Table 26.3 to answer the following questions. Sketch an aggregate supply and aggregate demand...
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