If the Economy Is at Full Employment, Increases in Government

question 201

Multiple Choice

If the economy is at full employment, increases in government spending

• A) have a multiplier effect on equilibrium output.
• B) have no effect on the aggregate price level.
• C) are primarily absorbed by price increases.
• D) reduce aggregate output.

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Definitions:

Behavioral Economists

Specialists in an area of economics that combines insights from psychological research with economic theory to better understand decision-making processes.

Large Risks

Exposures to significant potential losses or gains, often requiring careful assessment and management in decision-making processes.

Small Risks

Risks that have a minor potential impact or a very low probability of occurring.

Fair Coin

A coin that has an equal likelihood of landing on heads or tails when flipped, symbolizing a 50/50 chance in probability terms.