Macroeconomists Cannot Conduct Controlled Experiments, Such as Testing Various Tax

question 7

Multiple Choice

Macroeconomists cannot conduct controlled experiments, such as testing various tax and expenditure policies, because:

• A) it is against the law.
• B) they tried it once and it did not work.
• C) they must make use of the data history gives them.
• D) economists already know the answers that would come out of the experiments.

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Definitions:

Short-Run Aggregate Supply Curve

The short-run aggregate supply curve represents the relationship between the total supply of goods and services that firms in an economy are willing to produce and sell at different price levels, over a short period.

Recessionary Gap

A situation where an economy's real GDP is lower than its potential GDP, indicating underutilized resources and economic slack.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, often used in economic analysis and policy-making.

Expansionary Gap

A situation where the actual output of an economy exceeds its potential output, often leading to inflationary pressures.