Suppose Real and Potential GDP Are Initially Equal

question 32

Multiple Choice

Suppose real and potential GDP are initially equal. If government purchases change, which of the following best explains what will happen first?

• A)Potential GDP will change by the same amount as aggregate expenditure.
• B)The AD curve will shift.
• C)Both the AD curve and the IA line will shift.
• D)The IA line will shift.
• E)There will be movement along the AD curve.

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Definitions:

Mythic "Wild" West

A romanticized and exaggerated portrayal of the American West during the late 19th century, emphasizing adventure, lawlessness, and individualism.

Second Industrial Revolution

A phase of rapid industrialization in the late 19th and early 20th centuries, marked by advancements in steel production, electricity, and transportation.

Second Industrial Revolution

A period of rapid industrial growth and technological innovation during the late 19th and early 20th centuries, characterized by the expansion of steel, electric, and chemical industries.

American West

A region of the United States known for its frontier history, expansion, and the "Wild West" era, characterized by extensive exploration and settlement in the 19th century.