Author Question: If aggregate demand intersects aggregate supply in the horizontal range of the aggregate supply ... (Read 189 times)

Ebrown · **on:** Jun 30, 2018

If aggregate demand intersects aggregate supply in the horizontal range of the aggregate supply curve, then, other things equal, an increase in government spending will:
a. raise real GDP by the amount indicated by the government spending multiplier and leave the price level unchanged.
b. lower real GDP by an amount equal to the increased spending and reduce inflation.
c. raise the price level and leave real GDP unchanged.
d. raise both real GDP and the price level by a multiple of the initial spending increase.
e. have no effect on real GDP or the price level, because all private investment will be crowded out.

Question 2

If Bill expects to earn a higher income next month, he may choose to
a. save more now and spend less of his current income on goods and services.
b. save less now and spend more of his current income on goods and services.
c. decrease his current demand for goods and services.
d. move along his current demand curve for goods and services.