Which of the Following Correctly Describes the Mechanics of the Spending

question 7

Multiple Choice

Which of the following correctly describes the mechanics of the spending multiplier?

• A)An initial increase in aggregate expenditures, such as an increase in government spending, shifts the aggregate expenditures curve upward vertically.
• B)After the expenditures curve shifts upwards, the economy is not in equilibrium because aggregate expenditures now exceed aggregate output, leading to inventory depletion.
• C)Real GDP increases in response to inventory depletion, eventually leading to a new higher level equilibrium real GDP.
• D)All of the above answers are correct.

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Definitions:

Posterior

Pertaining to the back side of the body or an organ, opposite of anterior.

Coracobrachialis

A muscle in the shoulder that helps in flexing and adducting the arm.

Pectoralis Major

A large muscle in the upper chest that functions in the movement of the shoulder and upper arm.

Deltoid

A large, triangular muscle covering the shoulder joint and responsible for lifting and rotating the arm.