Consider a Closed- Economy AD/AS Model

question 83

Multiple Choice

Consider a closed- economy AD/AS model. If an increase in the government's budget deficit drives up market interest rates,

• A)credit will become less expensive.
• B)private expenditure will likely increase.
• C)some private investment expenditure will probably be crowded out.
• D)nothing -- government borrowing cannot push up interest rates.
• E)the money supply will increase.

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Definitions:

Cost Curve

A graphical representation that shows the relationship between the total cost incurred by a firm and the level of output produced.

Average Total Cost

The cost per unit of output, found by dividing the total cost (fixed plus variable) by the number of units produced.

Cigars

Rolled bundles of dried and fermented tobacco leaves designed to be smoked.

ATC and MC Curves

Graphs in economics that represent a firm's average total costs (ATC) and marginal costs (MC) at different levels of production.