Consider an Economy with a Relatively Steep AS Curve

question 17

Multiple Choice

Consider an economy with a relatively steep AS curve. If there is a shift to the right in the AD curve, there will be a _ in the price level and _ in national output.

• A)large increase; a small decrease
• B)small increase; a large increase
• C)large increase; a small increase
• D)large increase; no change
• E)small increase; a large decrease

---

Definitions:

Budget Deficit

A budget deficit happens when a government's expenditures surpass its revenues within a given fiscal period.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers at those prices.

Net Capital Outflow

Refers to the difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreigners. A positive net capital outflow means a country is investing more abroad than others are investing in it.

Open-Economy Macroeconomic Model

A framework for analyzing economies that engage in international trade, highlighting how these economies interact with the rest of the world economically.