Suppose the economy is hit by a positive AD shock that puts the economy is a short-run equilibrium above potential output. If there is no policy response, the economy's self-adjustment mechanism will cause wages and price expectations to will be the economy's return to potential output. and the expectations adjust, the quicker O decrease, slower O decrease, quicker O increase, slower O increase, quicker If an aggregate demand shock initially decreases investment spending by $80 billion and the MPC equals .6, then O in the short-run, the AD curve shifts to the right by $32 billion O in the short-run, the AD curve shifts to the right by $80 billion O in the short-run, the AD curve shifts to the right by $200 billion O in the short-run, the AD curve shifts to the right by $48 billion

Suppose the economy is hit by a positive AD shock that puts the economy is a short-run equilibrium above potential output. If there is no policy response, the economy's self-adjustment mechanism will cause wages and price expectations to will be the economy's return to potential output. and the expectations adjust, the quicker O decrease, slower O decrease, quicker O increase, slower O increase, quicker If an aggregate demand shock initially decreases investment spending by $80 billion and the MPC equals .6, then O in the short-run, the AD curve shifts to the right by $32 billion O in the short-run, the AD curve shifts to the right by $80 billion O in the short-run, the AD curve shifts to the right by $200 billion O in the short-run, the AD curve shifts to the right by $48 billion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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