Author Question: A country's expenditure multiplier is constant over time. Explain whether the previous statement is ... (Read 56 times)

gbarreiro · **on:** Jun 29, 2018

A country's expenditure multiplier is constant over time. Explain whether the previous statement is correct or incorrect.

What will be an ideal response?

Question 2

The short-run Phillips curve presents a tradeoff because a

A) lower unemployment rate can be achieved at the cost of a higher inflation rate.
B) higher inflation leads to a higher nominal interest rate.
C) lower unemployment rate can be achieved at the cost of a lower inflation rate.
D) higher price level leads to a lower real GDP.
E) higher unemployment rate can be achieved at the cost of a higher inflation rate.

vboyd24 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The statement is incorrect. The expenditure multiplier changes as marginal income tax rates change, as the marginal propensity to import changes, and as the marginal propensity to consume changes over time.

Answer to Question 2

A