According to the Model a Permanent Decrease in Government Purchases

question 2

Multiple Choice

According to the model a permanent decrease in government purchases does not increase the real wage according to the market clearing model because:

• A)labour supply and labour demand decrease about the same amount.
• B)labour supply is fixed.
• C)labour demand is downward sloping.
• D)neither labour demand nor labour supply shift due to the permanent increase in government purchases.

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Definitions:

Marginal Dollar

This refers to the additional or next dollar of income or expense in financial analysis.

Financial Assistance

Monetary aid provided to individuals, businesses, or governments to support them financially.

Transfers

Movements of funds between different sectors or entities, often referring to government payments like social security or unemployment benefits.

Government Assistance

Financial or other aid provided by a government to individuals, organizations, or other governments.