Policy CANNOT Offset the Effects of A

question 89

Multiple Choice

Policy CANNOT offset the effects of a:

• A) positive demand shock by decreasing government spending.
• B) negative demand shock by cutting taxes.
• C) negative supply shock by increasing money supply.
• D) positive demand shock by increasing taxes.

---

Definitions:

Complementariness

The characteristic of goods or services that increases their value when used together with other goods or services, enhancing consumer satisfaction or utility.

Substitutability

The degree to which one good or service can be replaced by another in consumption or production, often influencing competition and pricing in markets.

Elasticity of Supply

A measure of how much the quantity supplied of a good or service changes in response to a change in price.

Factor of Production

Inputs used in the production of goods or services, typically categorized into land, labor, capital, and entrepreneurship.