Consider a Simple Macro Model with a Constant Price Level

question 57

Multiple Choice

Consider a simple macro model with a constant price level and demand- determined output. Suppose desired aggregate expenditures are less than the current level of national income. The vertical distance between the AE curve and the 45- degree line represents

• A)the amount by which desired expenditures exceeds output.
• B)desired accumulation of inventories.
• C)the output gap.
• D)the amount by which output exceeds desired expenditures.
• E)desired decumulation of inventories.

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Definitions:

Lemon Test

A three-pronged criterion used by courts to decide if a law violates the Establishment Clause of the First Amendment.

Government Involvement

The extent to which a government participates in or influences various aspects of society or the economy.

Rational Basis Review

A standard of review used by courts to evaluate the constitutionality of a law or government action, requiring that the law be rationally related to a legitimate governmental interest.

Establishment Clause

A provision of the First Amendment to the U.S. Constitution that prohibits the government from establishing an official religion, endorsing all religions, or favoring one religion over others.