Author Question: Which of the following correctly describes the mechanics of the spending multiplier? a. An initial ... (Read 83 times)

Arii_bell · **on:** Jun 30, 2018

Which of the following correctly describes the mechanics of the spending multiplier?
a. An initial increase in aggregate expenditures, such as an increase in government spending, shifts the aggregate expenditures curve upward vertically.
b. After the expenditures curve shifts upwards, the economy is not in equilibrium because aggregate expenditures now exceed aggregate output, leading to inventory depletion.
c. Real GDP increases in response to inventory depletion, eventually leading to a new higher level equilibrium real GDP.
d. All of the above answers are correct.

Question 2

Gold is a perfect medium of exchange and measure of value because of its:
a. divisibility, portability, and homogeneity.
b. divisibility and durability.
c. durability and relative scarcity.
d. durability and homogeneity.
e. divisibility, durability, and relative scarcity.