Suppose Real and Potential GDP Are Initially Equal

question 32

Multiple Choice

Suppose real and potential GDP are initially equal. If government purchases change, which of the following best explains what will happen first?

• A)Potential GDP will change by the same amount as aggregate expenditure.
• B)The AD curve will shift.
• C)Both the AD curve and the IA line will shift.
• D)The IA line will shift.
• E)There will be movement along the AD curve.

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Definitions:

Public Behavior

relates to how individuals act and interact in social settings and public places, governed by societal norms and etiquette.

Compliance

The act of conforming to a request or demand, often from a figure of authority.

Compliance Tactics

Strategies used to persuade or influence others to agree with or obey a request or command.

Free Samples

Small quantities of a product given at no charge, allowing consumers to try before making a purchase decision.