A Change in Government Purchases Has the Greatest Effect on the Economy

question 59

Multiple Choice

A change in government purchases has the greatest effect on the economy in the short run when _____.

• A)the aggregate demand curve is relatively flat.
• B)the aggregate demand curve is relatively steep.
• C)the short-run aggregate supply curve is relatively flat.
• D)the aggregate demand curve is vertical.
• E)the short-run aggregate supply curve is vertical.

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Definitions:

Money Holdings

The total sum of cash and liquid assets that are held by individuals or businesses at any given time.

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulating banks, maintaining financial stability, and providing financial services.

Government Purchases

Expenditures by government entities for goods and services that are part of a country's gross domestic product.

Taxes

Obligatory fiscal dues or alternative forms of impositions placed on taxpayers by a governmental body to support government expenditures and multiple public costs.