Refer to the Information Provided in Figure 32

question 143

Multiple Choice

Refer to the information provided in Figure 32.2 below to answer the question(s) that follow. Figure 32.2
-Refer to Figure 32.2. According to ________, a(n) ________ fiscal policy in the long run and after all the adjustments have been made increases price level above P₁, but does not change equilibrium output.

• A) Keynes; contractionary
• B) Keynes; expansionary
• C) monetarists; expansionary
• D) the new classicals; contractionary

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Definitions:

Output

Refers to the total amount of goods or services produced by an entity in a given period.

Production Function

A mathematical relationship that describes the maximum amount of output that can be produced from a given set of inputs under certain technology.

Returns To Scale

The rate at which production output increases as a result of a proportional increase in all inputs or resources.

Marginal Product

The increase in output resulting from a one-unit increase in the input, keeping all other inputs constant.