If No Fiscal Policy Changes Are Made, Suppose the Current

question 25

Multiple Choice

If no fiscal policy changes are made, suppose the current aggregate demand curve will increase horizontally by $1,000 billion and cause inflation. If the marginal propensity to consume is 0.75, federal policymakers could follow Keynesian economics and restrain inflation by decreasing:

• A) government spending by $250 billion.
• B) taxes by $100 billion.
• C) taxes by $1,000 billion.
• D) government spending by $1,000 billion.

Calculate price elasticity of demand using price and quantity information.

Distinguish between types of goods (normal, inferior, luxury) based on income elasticity of demand.

Explain the factors that influence the elasticity of supply and how it varies in the short run versus the long run.

Understand and identify the characteristics of perfectly elastic and inelastic demand curves.

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Definitions:

Osteogenesis Imperfecta (OI)

A genetic disorder characterized by brittle bones that break easily, due to a defect in the production of a protein called collagen which is essential for bone strength.

Cure for the Disorder

The successful elimination or management of symptoms and causes of a specific disorder, restoring health.

Compartment Syndrome

A painful and potentially serious condition caused by increased pressure within a muscle compartment, often leading to muscle and nerve damage.

Capillary Refill

A test used to assess peripheral perfusion and dehydration by pressing on a nail bed and observing how quickly the color returns.