When All Changes in the World Are Due to

question 33

Multiple Choice

When all changes in the world are due to

• A) fiscal policy, purchasing power parity holds true in the long run.
• B) monetary policy, purchasing power parity does not hold true in the long run.
• C) monetary policy, purchasing power parity holds true in the long run.
• D) monetary policy, purchasing power parity holds true even in the short run.
• E) fiscal and monetary policy, purchasing power parity holds true in the long run.

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Definitions:

Multiplier

An economic factor that quantifies the impact of a change in investment, government spending, or other financial activity on the overall economy.

Marginal Propensity

Refers to the increase in personal consumer spending that occurs with an increase in disposable income.

Aggregate Expenditure

The total amount spent on goods and services in an economy at a given level of income during a specific period.

Marginal Propensity

The ratio of the change in consumption or saving to the change in income, indicating how income changes affect spending or saving behaviors.