Suppose the Economy Is Initially in Equilibrium, and Real and Potential

question 121

Multiple Choice

Suppose the economy is initially in equilibrium, and real and potential GDP are equal. Now, suppose export orders increase. Under these circumstances, which of the following statements is true?

• A)If the countercyclical fiscal policy response is made correctly, the new equilibrium will in the long run have a higher rate of inflation than if no response had been made.
• B)If the countercyclical fiscal policy response is made correctly, the new equilibrium will in the long run have a lower rate of inflation than if no response had been made.
• C)The inflation rate in the new long-run equilibrium will be the same, whether or not countercyclical fiscal policy is used.
• D)If the countercyclical fiscal policy response is implemented too late, the new long-run equilibrium will have a higher rate of inflation than if no response had been made.
• E)Countercyclical fiscal policy is unable to counter the effect of changes in export orders on real GDP.

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Definitions:

Psychological Well-Being

A state encompassing positive emotions, high life satisfaction, fulfillment, and positive functioning.

Psychological Aggression

Behaviors intended to harm another person psychologically or emotionally, which may include insults, threats, or manipulative tactics.

Decline Of Aggression

The reduction in aggressive behavior that can occur with age, due to social, cognitive, or biological factors.

Preschool Children

Young children typically in the age range of 3 to 5 years, who are in the developmental stage preceding formal education at school.