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:

Inertia Brake

A braking system that utilizes the inertia of a moving vehicle to activate the brake without manual application, often found in trailers.

Vehicle Battery Bank

A group of batteries connected together in a vehicle to supply electrical power, especially in electric and hybrid vehicles.

Transmission ECU

The electronic control unit responsible for managing an automobile's transmission system operations.

Self-adjusting

Refers to mechanisms or systems that automatically adjust parameters or settings to maintain or improve performance without manual intervention.