Which Statement(s) About Fiscal Policy and Aggregate Demand Is/are Correct

question 283

Multiple Choice

Which statement(s) about fiscal policy and aggregate demand is/are correct? I. A reduction in unemployment compensation would increase aggregate demand.
II) An increase in government spending would increase aggregate demand.
III) An increase in government spending would increase aggregate demand and lead to a permanent increase in aggregate output if government spending is implemented when the economy is in long-run equilibrium.

• A) I only
• B) II only
• C) II and III only
• D) I and III only

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Definitions:

Learned Habits

Behaviors acquired through repetition and reinforcement, becoming automatic responses to specific situations.

Biological Constraints

Biological constraints are limitations on learning that are caused by the biology of the organism, suggesting that some behaviors are inherently more difficult to learn than others due to genetics.

Ivan Pavlov

A Russian physiologist best known for his research in classical conditioning, particularly his experiments with dogs that led to the discovery of the conditioned reflex.

Cognitive Processes

Mental activities involved in acquiring, storing, retrieving, and using knowledge.